NEW YORK (TheStreet) -- Shares of Kate Spade & Co. (KATE) are gaining 0.54% to $28.17 in Thursday's early market trading after Wedbush initiated coverage with an "outperform" rating on the designer and marketer of a range of accessories and apparel, according to theflyonthewall.com.
The firm set a price target of $39.
"KATE can significantly grow its business by taking a relatively small amount of market share, while larger players are more dependent on category growth trends to move the needle," Wedbush analyst Morry Brown said.
This action comes after Kate Spade & Co. last Thursday issued its quarterly earnings report, topping earnings estimate for the first quarter.
The New York-based firm reported 3 cents per share, beating the Thomson Reuters consensus estimate of 2 cents per share. Similarly, revenue of $255 million for the quarter also topped analysts' forecast of $244.9 million.
On a year-over-year basis, the company's quarterly revenue increased 14.2%.
TheStreet Ratings team rates KATE SPADE & CO as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:
"We rate KATE SPADE & CO (KATE) 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, notable return on equity and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, deteriorating net income and premium valuation."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- KATE's revenue growth has slightly outpaced the industry average of 9.9%. Since the same quarter one year prior, revenues rose by 14.2%. 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.
- The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Textiles, Apparel & Luxury Goods industry and the overall market, KATE SPADE & CO's return on equity significantly exceeds that of both the industry average and the S&P 500.
- Net operating cash flow has significantly increased by 56.05% to -$43.32 million when compared to the same quarter last year. Despite an increase in cash flow of 56.05%, KATE SPADE & CO is still growing at a significantly lower rate than the industry average of 112.60%.
- The share price of KATE SPADE & CO has not done very well: it is down 16.24% and has underperformed the S&P 500, in part reflecting the company's sharply declining earnings per share when compared to the year-earlier quarter. Looking ahead, other than the push or pull of the broad market, we do not see anything in the company's numbers that may help reverse the decline experienced over the past 12 months. Despite the past decline, the stock is still selling for more than most others in its industry.
- You can view the full analysis from the report here: KATE Ratings Report