KeyBanc Upgrades Fossil (FOSL) to Overweight
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KeyBanc upgraded Fossil (NASDAQ: FOSL) from Sector Weight to Overweight with a price target of $42. Analyst Edward Yruma noted momentum in wearables.
"We believe that strong momentum in wearables can continue, we peg it at a $175M-$225M opp over the next 12 mos, and move to OW. We downgraded FOSL to UW on 1/10/14 based on our thesis that watches were in a period of secular weakness. Earnings fell from $7.10 (2013) to $2.05 (2016E). However, we believe that FOSL is approaching a key sales inflection point. 0.7x EV/sales remains close to trough levels, establish a $42 PT," said Yruma.
"We conducted over 150 checks and consistent with the FOSL/KORS earnings calls, reception to the new wearables remains very strong. Standouts include the Rose Gold KORS Bradshaw ($350) and the Gunmetal (Smoke) FOSL Marshal ($315). We now believe that wearables can drive $175M-$225M in rev, which could drive $0.50+ in EPS. For context, Fitbit (SW; Erickson) should do approximately $2.4B in rev, and Apple (OW; Hargreaves) $4.3B in Apple Watch sales. We raise our FOSL 2016E EPS to $2.05. LT, we think wearables could be a $1B+ opportunity," added the analyst.
Shares of Fossil closed at $32.92 yesterday.
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