VF Corp (VFC) shares have fallen off a cliff to a nine-month low. The maker of The North Face, Timberland and Vans disappointed investors with third-quarter revenue that missed Wall Street's estimates. Earnings beat thanks to cost reductions but the company needs more growth to meet expectations for future quarters.
VF stock trades around $53 and is less than 2% from a new 52-week low. It has lost 15% in the past three months and 17% in six months. With the all-important holiday shopping season coming up, VF expects more revenue weakness, making this a cheap stock that is no bargain.
The company expects fourth-quarter revenue to be up just 2% to $12.2 billion, which would mark a decline from its prior guidance for 3% to 4% increase. It expects fiscal year 2016 earnings of $3.13 a share, compared to the company's prior forecast of $3.20 per share, which would have translated to 5% growth.
So it makes sense to expect prolonged weakness in the stock price by similar margin. Analysts expect the company to earn $3.18 per share, which places the stock at a forward price to earnings multiple of 17, which is in line with the S&P 500 (SPX) index.
The stock maintains a consensus buy rating and an average price target of $63.50, implying additional premiums of almost 20%. However, assuming VF does earn $3.13 per share for the fiscal year, this would translate to growth of about 3%, below the 5% projected growth for the S&P 500 index. The more likely scenario is VF stock falls 3% to 5% or around $50 per share. It's at that point, VF stock becomes attractive, not be before.