The firm lowered the apparel company's price target to $2.10 from $4.25 citing promotional environment of its stores and reduced EBITDA expectations.
Shares of Pacific Sunwear of California closed at $2.01 yesterday.
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Separately, TheStreet Ratings team rates PACIFIC SUNWEAR CALIF INC as a Sell with a ratings score of D-. TheStreet Ratings Team has this to say about their recommendation:
"We rate PACIFIC SUNWEAR CALIF INC (PSUN) a SELL. This is driven by multiple weaknesses, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its generally high debt management risk, disappointing return on equity, poor profit margins and generally disappointing historical performance in the stock itself."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The debt-to-equity ratio is very high at 10.82 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Along with this, the company manages to maintain a quick ratio of 0.16, which clearly demonstrates the inability to cover short-term cash needs.
- Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Specialty Retail industry and the overall market, PACIFIC SUNWEAR CALIF INC's return on equity significantly trails that of both the industry average and the S&P 500.
- The gross profit margin for PACIFIC SUNWEAR CALIF INC is currently lower than what is desirable, coming in at 29.43%. Regardless of PSUN's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, PSUN's net profit margin of -6.07% significantly underperformed when compared to the industry average.
- PSUN's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 46.97%, which is also worse that the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
- PACIFIC SUNWEAR CALIF INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, PACIFIC SUNWEAR CALIF INC continued to lose money by earning -$0.71 versus -$0.78 in the prior year. This year, the market expects an improvement in earnings (-$0.28 versus -$0.71).
- You can view the full analysis from the report here: PSUN Ratings Report