Wedbush Cuts Price Target on J. Crew (JCG) to $34

August 27, 2008 1:47 PM EDT

Wedbush Morgan lowers its price target on J. Crew Group (NYSE: JCG) from $44 to $34, but maintains a Buy rating.

Following J. Crew's Q2 earnings disappointment, reported yesterday after the close, the firm lowered its estimates on the company, but believes that J. Crew stock still has a favorable risk/reward profile, thus its Buy rating. Further, Wedbush feels J. Crew's Direct Systems upgrade should help growth over the long-term.

The firm's Q3 and FY08 EPS estimates move from $0.45 and $1.69 to $0.30 and $1.48, respectively. The Street consensus for J. Crew's Q3 is $0.46. Wedbush said the reduction in expectations was due to "indications of higher-than-expected carryover inventory and additional costs (~$6M in H2) related to the direct infrastructure upgrades."

Wedbush's new price target on J. Crew is based on 19x the firm's FY09 EPS estimate of $1.75, which is slightly higher than the Street estimate of $1.71.

J. Crew Group, Inc. operates as a multi-channel specialty retailer of women's, men's, and children's apparel and accessories in the United States.

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