FBR Capital Cuts Price Target as Liberty Interactive (QVCA) Reports 2Q Results
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FBR Capital maintained an Outperform rating on Liberty Interactive (NASDAQ: QVCA), and cut the price target to $25.00 (from $30.00), following the company's 2Q earnings report. The June swoon was shocking because the last time QVC saw anything like this was the Great Recession. FBR now assumes a 7% revenue decline and 230 bps of gross margin erosion in 3Q.
Analyst Barton Crockett commented, "We cut our QVC estimates and price target after the company's surprise June swoon, disclosed on the 2Q16 earnings report on Friday, August 5, when U.S. revenues shockingly pivoted from mid-single-digit growth in April and May to midto high-single-digit declines in June, July, and early August. So, instead of our former estimate of 1% growth for QVC in the U.S. in 3Q16, we now assume a 7% revenue decline and 230 bps of gross margin erosion (similar to 3Q08). But we also presume that QVC does what it is designed for and responds quickly to a changing consumer environment, easing to a 3% U.S. revenue drop and 100 bps of gross margin pressure in 4Q16, and then 3% U.S. growth on steady margins in 2017 against easy comps. We believe that, if this plays out, over the next year, the stock can recover most of the 20% drop of last Friday. So we retain our Outperform rating but cut our price target by $5.00, to $25.00. (For more on the quarter, please see our note, "2Q16 React: In Line, but Spooky June," dated August 5, 2016.)"
Shares of QVC Group closed at $21.43 yesterday.
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