Needham & Company Reiterates a 'Buy' on bebe stores (BEBE); Turnaround Just Beginning

Needham & Company reiterates a 'Buy' on bebe stores, inc. (NASDAQ: BEBE) price target of $8.00.

Needham analyst says, "At~11x our CY12 EPS estimate of $0.29, (ex $3.05 in cash), BEBE is trading below the sector average of ~12x. We believe BEBE reached trough earnings of $0.01 and OM deterioration (0.9%) in CY09, down from peak of +22% in CY1999 and is on the way towards sales acceleration and margin expansion due to an improved product offering and better inventory control as evidenced by CY10 EPS of $0.05 and OMS of 1.1%. We are forecasting OMs of 2.5% in CY11 with acceleration to 5.8% in CY12. If sales trends accelerate and BEBE can return to +HSD% to +DD% OMs, the implied earnings power is $0.31 to $0.42 as every 100 bps of OM improvement contributes $0.04 to EPS. Given that BEBE is a turnaround story, we think fair valuation is ~15x, or the low-end of potential EPS of $0.31 plus the ~$3 in cash per share or ~$8."

"We are adjusting our F1Q12, F4Q12, FY12, & CY12 EPS estimates to $0.01, $0.09, $0.18, and $0.29, respectively, from $0.00, $0.08, $0.15, & $0.26."

For more ratings news on bebe stores, inc. click here and for the rating history of bebe stores, inc. click here.

Shares of bebe stores, inc. closed at $6.26 yesterday.

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