Abercrombie (ANF) 'Top Pick for LT Returns' -Piper Jaffray

Piper Jaffray reiterates its Buy rating on Abercrombie & Fitch (NYSE: ANF). The firm lowered its price target on the stock from $87 to $74, reflecting a reduction in the firm's FY09 EPS estimate from $5.72 to $5.57 and a slightly lower target multiple of 13x.

The firm calls Abercrombie & Fitch its top pick for long-term returns and believes that investors should buy the stock as it believes the market has over-corrected for increased risk to fundamentals. Further, Piper said it views Abercrombie as a "core mid-cap holding..."

After traveling with Abercrombie's CFO, Mike Kramer, Piper says it now has a "high degree of confidence in ANF's fundamental integrity and ability to grow through difficult selling cycles." The firm expects Abercrombie to use its $400 million in free cash flow generation, in addition to $300 million in cash on its balance sheet, to buyback stock under its 12 million share authorization.

While Piper is bullish on the stock long-term, the firm does note that it expects group valuations to remain under pressure given continuing macro headwinds.

The firm lowered its price target multiple on Abercrombie from 15x to 13x. With shares of Abercrombie trading around $58.50 today, the firm's new price target represents a potential return of about 26% from current levels.

Abercrombie & Fitch Co., through its subsidiaries, operates as a specialty retailer of casual apparel for men, women, and kids.

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