Men's Wearhouse (MW): Goldman Sachs Sees Yesterday's Decline as Buying Opp

Goldman Sachs reiterated a Buy rating on The Men's Wearhouse, Inc. (NYSE: MW) with a price target of $72. The stock declined yesterday during its analyst day presentation. Analyst Taposh Bari sees the 10% correction as a good entry point.

"We attribute the sell-off to a headline of “identified cost synergies” of $96mn by 2016 and $104mn by 2017, which falls below the “$100-150mn synergies by 2016” provided just a month ago. We walk away with the expectation that MW management still plans to achieve the $100- 150mn goal by 2016, which includes both “unidentified” cost synergies and potential revenue synergies from initiatives like a tuxedo rollout, increased penetration of big & tall and slim fit – all at JOSB. Management did not quantify these line items as they are still being refined," said Bari.

"Even if we were to take management’s targets at face value ($5.50-$6.00 EPS by 2017), we still see a stock price in the low $70s when applying a 15x P/E multiple and discounting the stock back two years at 10%," added the analyst. "We believe several bits of important information were lost amidst the headline reaction, including only 7% customer overlap between MW and JOSB, impressive upselling from the sale of Joseph Abboud merchandise, and another strong quarter at the legacy MW and Moore’s banners."

For an analyst ratings summary and ratings history on The Men's Wearhouse, Inc. click here. For more ratings news on The Men's Wearhouse, Inc. click here.

Shares of The Men's Wearhouse, Inc. closed at $51.66 yesterday.

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