Piper Jaffray Raises Target on J.Crew Group (JCG) from $39 to $50; Reiterates Overweight

October 23, 2009 7:24 AM EDT

Piper Jaffray reiterates an 'Overweight' on J.Crew Group (NYSE: JCG), price target increased from $39 to $50.

Piper analyst says, "We are reiterating our Overweight bias toward JCG shares off of the company's upwardly revised 2H guidance and what we believe to be further upside potential through the holiday season and into 2010. The clearing of excess inventory in 1H set up the margin structure for a material reversal as demand improved. The degree of the beat (50%; 25 cents) far exceeded expectations and reflects the leverage inherent in the company's dual-channel (retail & direct) model. In tandem with upward estimate revisions, we are raising our price target from $39 to $50, based on a similar 25x FY11E EPS multiple.

"We have raised our FQ3 estimates to the high-end of the guided range and Q4 to an implied range more commensurate with FQ408 - two years ago. FY09 operating margin of 6.8% is believed to mark the low point, with FY10 at 11.2% (vs. FY08 at 12.9% peak). Over time, we think 10-15% topline growth is achievable, which includes +lsd direct growth, +lsd to +msd comp sales rate, and 10% annual sq ft growth, resulting in annual earnings growth at 25%. Over the next 2-3 years, we think earnings power in the $3/share range is achievable and assumes the company reaches cons. op margins in the low- to mid-teens range."

To see more analyst ratings on JCG Click Here.

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