Auriga Initiates Coverage on Abercrombie & Fitch (ANF) with a Hold

October 16, 2009 8:17 AM EDT

Auriga initiates coverage on Abercrombie & Fitch (NYSE: ANF) with a Hold rating and a price target of $39.

Auriga analyst says, "We believe that ANF’s distinct brands are well-regarded in the domestic market and that international growth represents a viable long-term opportunity to aggressively build high-margin revenues. That said, the anticipated international rollout is not a new story and appears priced in. While confident in the long-term viability of management’s domestic initiatives – including better sourcing and lead times, reduction of unplanned promotional activity and improved merchandising – we believe that the recent upward stock movement has assumed future success based on one month of better-than-expected but still-weak results and ahead of the implementation of most initiatives. While we expect the teen subsector to be a relative outperformer in FY10 (given an improved fashion cycle, pent-up demand and the natural need to replenish), perceived value is still crucial and could prove problematic, in our view, given ANF’s premium historical price and brand perception. In addition, any delay in international rollout would likely put sales assumptions at risk. As such, with the stock trading above its historical five-year median forward 12-month P/E of 13.3x, the shares appear fairly valued."

To see more analyst ratings on ANF Click Here.

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