We all know analysts usually lag behind the market in updating their target prices, but I do like looking at recent reports since those reports are more in line with current company conditions and supply chain checks.Earlier this week, Canaccord Genuity initiated their coverage of KORS with a buy rating and a target price of $82, the highest on the street. Canaccord Genuity sees the company growing double globally by F2015. See below other price targets for the company. The average price target on the street is $73.
As you can see above, Barclays has continued to up their price target as KORS continues to grow, with plenty of room for expansion remaining. Additionally, there have been bullish comments made by other analysts in the past few days regarding KORS.Earlier this month, Morgan Stanley (NYSE:MS) added KORS to its best ideas list, and called the company “retail’s best growth story” and says now is the time to buy ahead of KORS report on May 29. Current valuation versus calendar-2014 EPS estimates “represents compelling value for a company that we think has the highest EPS achievability in retail,” said Morgan.
The recent fundamental developments clearly point that Michael Kors is in trouble. FQ4 2015 comp sales are down even on a constant currency basis and the company guided fiscal 2016 revenue and EPS below views. The company has raised its buyback authorization by $500 million and now has $1 billion left under its share repurchase program, which should be enough to buy back 8% to 9% of outstanding shares at the current price of $55 as of this writing which should help protect the downside. The valuation might seem compelling at current levels, but the decline in comp sales, low revenue guidance, and margin contraction are serious warning signs. I believe that there are much better growth opportunities to pursue at the moment and I am removing my buy rating and price target on Michael Kors.