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A mild winter in many parts of the country and a job-crushing pandemic have hurt demand for pricey down coats, and in turn,
Canada Goose Holdings
’ stock. Yet Cowen & Co. argues the worst is over for the outwear company, sending shares soaring more than 10% on Wednesday.
Analyst Oliver Chen lifted his rating on
(ticker: GOOS) to Outperform from Market Perform, and raised his price target to $36 from $31. He believes the company “is well positioned as an outdoor resource amid the pandemic, as a leading brand in stores, and as a global luxury beneficiary as China improves faster.”
He highlights the company’s positive free cash flow, robust margins, and profitable retail channel, despite the headwinds facing the sector this year. Moreover, his recent consumer surveys showed that more shoppers are listing Canada Goose as their first choice for outerwear.
The jackets may have a high price tag, but Chen writes that their warmth, utility, and lower price points than other luxury players can help the company take market share. This is especially true given that the pandemic shows no signs of slowing in the U.S. as winter approaches, which means outdoor recreation—and related gear—will likely be a continuing trend that Canada Goose can benefit from.
Of course, tourism is a major driver for Canada Goose, and that has been hurt by Covid-19. Yet Chen believes the company is wise to offset this loss by focusing on sales in China itself. He estimates that China can contribute more than 50% of annual earnings per share over time—and that growth could also make Canada Goose an attractive takeover target.
Canada Goose stock is up 10.6% to $32.82 in recent trading, although it is still off 11.3% for the year.
Write to Teresa Rivas at [email protected]