NEW YORK (TheStreet) - Zumiez (ZUMZ) shares surged more than 8% on Friday after the teen action sportswear chain received an upgrade to "buy" from Bank of America Merrill Lynch.
BofA Merrill Lynch analyst Paul Alexander raised his rating to "buy" from "neutral." Alexander said he believes the Lynnwood, Wash.-based company is well positioned for 2014 as well as the longer term, and said the recent pullback in stock performance is ignoring "solid sales trends."
Shares were rising 8.4% to $26.79 on Friday.
"A recent pullback in the shares has caused valuation to drop near historical lows and below the group average (14x versus peers at 16x)," Alexander wrote in a note on Friday. "We think the current valuation discount is unwarranted as we expect Zumiez to grow earnings faster than its specialty retail peers (13.5% over 2014-2015 versus 11.5% for the group) through consistent new store expansion and e-commerce growth. We also expect Zumiez's business to be resilient in the near term, as evidenced by solid November comps."
The analyst raised his 2014 earnings expectations by 5 cents to $1.72 a share, which reflects a solid holiday sales season and good execution next year. He raised his 12-month price objective to $29.
Alexander's estimate is on the high-end of estimates. Consensus expectations call for the company to post earnings of $1.72 a share for the January 2015-ending year.
Zumiez's shares have pulled back 17% since Nov. 25, coinciding with "worrisome 4Q comp guidance from surf/skate competitor Tilly's (TLYS) of negative mid- to high-single-digits," Alexander wrote.