Restoration Hardware (RH) PT Cut to $60 at Nomura
Nomura Securities analyst Jessica Schoen Mace cut her price target on Restoration Hardware (NYSE: RH) to $60.00 (from $75.00) following Q1 results and weak guidance but maintained a Buy rating. While near-term results are very disappointing and the lack of visibility is frustrating, they believe that the strategy remains consistent.
Mace commented, "As we evaluate RH's earnings miss and our decline in expectations for 2016, we focus on three factors we consider to be the most incremental to the down shift in the near-term outlook for the company: a) selling cycle with the Grey Card is longer, leading to softer sales trends, b) the SKU rationalization project that will have a $0.30 - $0.35 impact on EPS, and c) more customer accommodation costs, which will be $0.08 higher than previously expected. While the impact these factors will have on near-term results is very disappointing and the lack of visibility is frustrating, we believe that the strategy remains consistent and that there are clear signs that it is working, despite the increasing amount of noise. We take a more cautious stance near term, with a reduction in our price target to $60, but we continue to be optimistic on the long-term opportunity, and would like to own the stock as the investments being made today begin to materialize."
The firm cut FY16E EPS from $2.70 to $1.70 and FY17E EPS from $3.70 to $3.00.
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Shares of Restoration Hardware closed at $36.07 yesterday.