Goldman Sachs Removes Michael Kors (KORS) from CL-Buy List

Goldman Sachs downgraded Michael Kors (NYSE: KORS) from Conviction Buy to Buy with a price target of $95.00 (from $143.00). The change follows weaker than expected Q2 comps. Analyst Lindsay Drucker Mann continues to think the stock is attractive.

"The 2Q15 (Sept.) EPS report delivered some negatives vs. our expectations, but we believe these had already been discounted by the stock heading into results. These include a slower US growth story and more significant Retail margin compression. We lower out-year EPS to reflect a moderated multi-year view of sales and margins. That said, with shares trading near $71, we believe they embed a view that the US growth story has peaked, an overly bearish view in the light of category tailwinds and KORS’s attractive industry position," said Drucker Mann.

"As we approach our model with a clean slate, we lower our long-term sales and margin view, and believe KORS offers 15-20% medium-term EPS growth with attractive ROIC and favorable category exposure. Drivers underpinning this are: (1) a midsingle digit long-term handbag category growth rate, (2) KORS should gain share from COH with the two brands today roughly equal in market share despite KORS’s brand equity advantage, and (3) globally, luxury brands\ are fleeing entry price points to shore up brand equity, leaving the door open for KORS as a leading global accessible luxury brand to pick up share," she added.

For an analyst ratings summary and ratings history on Michael Kors click here. For more ratings news on Michael Kors click here.

Shares of Michael Kors closed at $71.42 yesterday.

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