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KeyBanc Names Francesca's (FRAN) Top Pick in Softlines

December 19, 2012 9:02 AM EST Send to a Friend
Get Alerts FRAN Hot Sheet
Price: $13.54 -3.29%

Rating Summary:
    15 Buy, 5 Hold, 1 Sell

Rating Trend: Down Down

Today's Overall Ratings:
    Up: 24 | Down: 13 | New: 52
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KeyBanc reiterated its Buy rating and $38 price target on Francesca's Holdings (NASDAQ: FRAN) Wednesday and named the stock its Top Pick in Softlines.

"We think recent concerns about management changes and the sustainability of operating margins are overblown; the 21.2x 2013 P/E, compared to 13.9x 2013 P/ E for the specialty retail peer group, is highly attractive given our modeled 21% EPS growth; and we add the stock to our Best Picks in Softlines list," the analysts notes.

They continued, "Collections. Overall, we came away upbeat that a ~25% operating margin is sustainable over the long term. Despite what is turning out to be a tepid holiday for the industry, FRAN is less susceptible to the heavy markdowns given its low penetration of weather sensitive items (e.g., sweaters and outerwear), a high reliance on giftable items (17% in 4Q11), and a shallow inventory strategy. Finally, a recent stock purchase on 12/12/12 and lock-up by soon-to-retire John De Merritt should allay many bearish concerns. We reiterate our BUY rating and $38 price target, which implies a 31.1x target 2013 P/E multiple on our 2013 EPS estimate compared to a 21.2x P/E on the current stock price and 13.9x P/E for the specialty retail peer group."

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 $26.78 yesterday.




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