Ascena Retail (ASNA) Stock Rallying on Upbeat Analysts' Actions Following Ann Acquisition

NEW YORK (TheStreet) -- Shares of Ascena Retail Group (ASNA) are rallying, higher by 5.6% to $14.86 on heavy volume in late morning trading on Tuesday, one day after the national specialty retailer announced that it will be acquiring Ann Inc. (ANN) for $47 per share.

The transaction values Ann at about $2 billion, and is expected to close in the second half of this year.

"With the addition of the Ann Taylor and LOFT brands, Ascena will become one of North America's largest and most diversified specialty apparel retailers, with a tremendous set of opportunities to continue to expand its leadership position in the women's apparel market," Ascena CEO David Jaffe said in a statement yesterday.

This morning, Ascena Retail was issued several positive analysts' notes.

FBR Capital upgraded the company to "outperform" from "market perform," saying synergies from the Ann acquisition are under-appreciated following yesterday's sell-off.

FBR analysts are positive on the acquisition deal, and raised its price target for Ascena shares to $20 from $12.

SunTrust analysts are also upbeat on the deal and said that the decline in Ascena's stock is unwarranted.

Piper Jaffray also tells investors to use yesterday's pullback in shares of Ascena as a buying opportunity.

Piper said it sees the potential for "significant" share appreciation from the Ann acquisition. Analysts at Piper raised their price target on Ascena shares to $18 from $16, and kept its "overweight" rating.

About 4.61 million shares have changed hands as of 11:24 a.m. ET today, compared to its average trading volume of about 2.15 million shares a day.

Mahwah, N.J.-based Ascena Retail Group is a national specialty retailer offering clothing, shoes and accessories for missy and plus-size women under the Lane Bryant, maurices, dressbarn and Catherines brands.

Insight from TheStreet's Research Team:

Jim Cramer commented on Ascena in a recent post on RealMoney.com. Here is a snippet of what Cramer had to say about the stock:

Monday we learned that the publicly traded company of Ann Taylor (ANN) will be disappearing within the confines of Ascena  (ASNA) for cash and stock. The deal, which gives shareholders a huge 21% premium, will be fabulous for Ascena because it needs a higher-end offering to complement its current iterations and it can save money immediately.

Ascena's talking about saving $150 million in synergies over three years, but I think it will be more than that because I am sure CEO David Jaffe, who is on Mad Money Monday night, will be able to figure out which stores are winners and which ones are not needed. That's a tough thing for Ann's management to do, but it is expected now that Ascena's taking it over.

We know apparel's been weak. Some of that is that people are being more frugal. Some of that is because there are many purchases online that steal from bricks-and-mortar sales. But let's face it. We all know we are overstored in this country. This move will take out some stores and rationalize.

-Jim Cramer, 'Deluge of Deals Isn't About to Dry Up' originally published 5/18/2015 on RealMoney.com.

Want more information like this from Jim Cramer BEFORE your stock moves? Learn more about RealMoney.com now.

Separately, TheStreet Ratings team rates ASCENA RETAIL GROUP INC as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:

"We rate ASCENA RETAIL GROUP INC (ASNA) 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, largely solid financial position with reasonable debt levels by most measures and reasonable valuation levels. However, as a counter to these strengths, we also find weaknesses including feeble growth in the company's earnings per share, deteriorating net income and disappointing return on equity."

You can view the full analysis from the report here: ASNA Ratings Report

 

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