Goldman Sachs Downgrades Francesca's Holdings (FRAN) to Sell; Analyst Sees Structural Challenges

January 29, 2014 6:40 AM EST
Get Alerts FRAN Hot Sheet
Price: $18.54 -1.17%

Rating Summary:
    12 Buy, 12 Hold, 1 Sell

Rating Trend: Down Down

Today's Overall Ratings:
    Up: 22 | Down: 32 | New: 34
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Goldman Sachs downgraded Francesca's Holdings (NASDAQ: FRAN) from Neutral to Sell with a price target of $16.00 (from $18.00). Analyst Lindsay Drucker Mann thinks structural challenges pose downside risk to FY14.

"We downgrade FRAN to Sell from Neutral with an implied 22% downside risk to our 6-month price target of $16. Our chief concern is that FRAN's multi-quarter stretch of deteriorating fundamentals is structural, rather than cyclical or execution driven. As a result, we expect only modest comp growth for the foreseeable future, accompanied by margin compression off FRAN’s peer-leading low-20s level (13E). We reduce FY14E/FY15E EPS to $1.18/1.40, with 5% downside risk to consensus. Sentiment is already guarded, reflected in 10 days short interest, but we expect further multiple compression towards 13X P/E as fading cyclical headwinds cast a brighter light on FRAN’s structural issues," said Drucker Mann.

For an analyst ratings summary and ratings history on Francesca's Holdings click here. For more ratings news on Francesca's Holdings click here.

Shares of Francesca's Holdings closed at $20.45 yesterday.

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