NEW YORK (TheStreet) -- Shares of Pier 1 Imports (PIR) are gaining by 1.60% to $13.35 in mid-morning trading on Thursday, after analysts at Cantor Fitzgerald initiated coverage on the company with a "buy" rating and a $17 price target.
The firm said that e-commerce should soon be an earnings driver, with the heavy investments that have pressured EBIT margin largely complete. They added that Pier 1 Imports' e-commerce business should double over the next three years.
"The sizable upfront investments in technology, personnel, and infrastructure that were needed to transition Pier 1 to an omni-channel platform are largely complete, and we believe the company will start to leverage some of these expenses as the year progresses."
Pier 1 Imports engages in the retail sale of decorative home furnishings, gifts, and related items.
TheStreet Ratings team rates PIER 1 IMPORTS INC/DE as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:
"We rate PIER 1 IMPORTS INC/DE (PIR) a HOLD. The primary factors that have impacted our rating are mixed, some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its revenue growth, attractive valuation levels and largely solid financial position with reasonable debt levels by most measures. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, disappointing return on equity and a generally disappointing performance in the stock itself."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- Despite its growing revenue, the company underperformed as compared with the industry average of 10.3%. Since the same quarter one year prior, revenues slightly increased by 5.4%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- Net operating cash flow has increased to $111.90 million or 14.10% when compared to the same quarter last year. Despite an increase in cash flow, PIER 1 IMPORTS INC/DE's cash flow growth rate is still lower than the industry average growth rate of 32.07%.
- Reflecting the weaknesses we have cited, including the decline in the company's earnings per share, PIR has underperformed the S&P 500 Index, declining 23.50% from its price level of one year ago. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.
- The company, on the basis of change in net income from the same quarter one year ago, has underperformed when compared to that of the S&P 500 and greatly underperformed compared to the Specialty Retail industry average. The net income has decreased by 22.3% when compared to the same quarter one year ago, dropping from $42.59 million to $33.09 million.
- You can view the full analysis from the report here: PIR Ratings Report