'Victim of negative investor sentiment': Jefferies upgrades Boot Barn to 'buy'
The stock jumped more than 10%
Jefferies pointed to a recent reset in the company's valuation as a key reason for the upgrade, noting it had created an attractive entry point / Photo: Facebook / Boot Barn
Jefferies has upgraded its rating on shares of mid-cap retailer Boot Barn Holdings, which specializes in western-style apparel and footwear, and now recommends “buy.” The company, whose shares have fallen nearly 16% year to date, has been a victim of unwarranted negative sentiment, the analysts say. Against this backdrop, Boot Barn shares surged more than 10% on Monday.
Details
Jefferies raised its recommendation on Boot Barn shares from “hold” to “buy,” Motley Fool analyst Eric Volkman writes. The target price was left unchanged at $195 per share, implying nearly 31% upside to the stock’s closing price on Monday. On that day, following the Jefferies upgrade, the shares jumped 10.30% to $149.00.
Jefferies' rationale
The recent decline in Boot Barn’s share price has created an attractive entry point into the company’s equity, Jefferies analyst Corey Tarlow said, according to StockStory. Since the beginning of the year – even taking into account the Monday rally – the retailer’s shares have fallen nearly 16%.
The company has become a victim of negative investor sentiment, Tarlow said, according to the Motley Fool. StockStory writes that this sentiment was driven by the escalation of the conflict in the Middle East and rising oil prices, as this could lead to a new wave of inflation and a reduction in consumers’ budgets for discretionary spending.
Tarlow called the market reaction unwarranted, as Boot Barn’s sales have demonstrated resilience while its store network continues to expand. In its fiscal third quarter, ended December 27, the company’s net sales increased 16% year over year to $705.6 million. During the period, the retailer opened 25 stores, bringing its total store count to 514.
The retailer’s stable fundamentals are supported by “encouraging levels of consumer demand,” Tarlow wrote.
What other analysts say
Wall Street broadly shares Tarlow’s optimism: 15 analysts recommend buying Boot Barn shares, while only one recommends holding them. The average target price is $237 per share, implying 59% upside.
Most retailers depend on trends, while Boot Barn is a niche player that stands out from competitors, the Motley Fool's Volkman writes. Back in January, BofA Securities included Boot Barn in a list of 10 smid-cap names investors should watch.
