Pali Research Initiates Coverage J. Crew Group (JCG) with a Buy; Aspirational Brand with Accessible Price Points – Poised for Market Share Gains

October 30, 2009 9:02 AM EDT

Pali Research initiates coverage J. Crew Group (NYSE: JCG) with a Buy rating and $50 price target.

Pali analyst says, "We are initiating coverage of JCP with a BUY based on our view JCG is well-positioned to increase market share through strong positioning (product and value), is more leveraged to a recovery (execution issues on top of macro and exposure to direct), and offers increasingly scarce store growth. Combined, these factors will drive continued EPS upside and premium valuation despite an impressive run YTD...We think JCG is capturing the luxury trade-down consumer and is well-positioned to benefit from ongoing market share gains. With value here to stay, its unique product at compelling price points is increasingly sought out by customers that are increasingly price and value conscious. The combination of exceptional product (including impressive early previews of spring) and trade down will drive continued topline outperformance."

"Expect continued outperformance despite impressive run YTD. The stock is up 243% YTD vs. Softlines up 76%. FY09 and FY10 EPS estimates have risen 160% and 130%, respectively. In our view it is not too late to invest in JCG. Our FY09 and FY10 EPS estimates of $1.65 and $2.10 are above the Street at $1.60 and $1.89, respectively. JCG has historically traded at a 40% premium to specialty peers on both a PE and EBITDA basis with both a 3 year average of 26.8x and 10.7x. We expect topline and EPS outperformance will push the stock higher and believe JCG deserves a premium valuation for increasingly scarce growth opportunities."

To see more analyst ratings on JCG Click Here.

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