It's probably pretty obvious that I'm an investor. And as an
investor I look to put money into a situation where it can work for
me, not against me. I'm a firm believer that you should invest in
assets that appreciate and lease anything that depreciates. That's
why I don't buy new cars but I've been drooling over a 1970 Mach I
for the last several years. It's also why I don't go to the mall
and buy silly things that are going to be worthless in the future.
Okay, so for the most part I don't do that. But sometimes at
Christmas or a birthday I get bamboozeled. A significant other or
family member will ask for something ridiculous for a gift like a
$500 purse. A $500 purse after they already own three $500 purses.
Okay, rant over. It's not only that I can't see the logic in
$500 purse, but I can't see the logic in buying the company that
makes them. And it's not because I have some personal vendetta
against the purses, I just listen to what the analysts have done
with their earnings estimates. In the case of
, it's enough to make them my
Bear of the Day.
You don't have to trust me on this call. You can ask one of the 21
analysts that have lowered their estimates over the last 60 days
for the current year or one of the 20 that did the same for next
year's numbers. The magnitude of the cut is substantial as well.
The year's number has dropped from $3.17 down to $3.04 but next
year's consensus fell from $3.44 all the way to $2.09. You read
that right, analysts believe that earnings will fall nearly 33%
next year. Not the direction you want to the earnings trend to be.
This is a big reason why Coach is a Zacks Rank #5 (Strong Sell) in
an industry that ranks in the bottom 43% of our Zacks Industry
The chart looks about as healthy as a Charlie Sheen EKG. Or mine
for that matter when I'm at the counter with my credit card out.
Let's start by flashing back to July 2013. The luxury brand was
trading above $60. For a few months it was a slow chop downwards.
Late summer and early fall the stock hovered in the mid $50s,
dropped harshly, then ran back up near $58. That last gasp for air
was the last chance to jump ship. The market slapped COH down hard
to start the year. Coach tried to hold up again near $50 until late
April when it all fell apart.
How nasty is it? $34, nearly half of where it was less than a year
ago. The 25 day moving average shifted by 5 days (25x5) which I use
to help determine trend is light years away at $40.52. The last
time COH traded above the 25x5 was late April. Just a week ago COH
was above $40 but it's just been getting worse since then. Put
mildly, there are more attractive spaces in this market right now.
Luxury retail brands losing favor in the market are not the place
There are much better investment ideas in this market than Coach
right now. The downward revisions for earnings have been beating
the stock into submission. Within the same industry investors
should check out Zacks Rank #1 (Strong Buy)
Vince Holding Corp (
Want the latest recommendations from Zacks Investment Research?
Today, you can download 7 Best Stocks for the Next 30 Days.
Click to get this free report
VINCE HOLDNG CP (VNCE): Free Stock Analysis
COACH INC (COH): Free Stock Analysis Report
To read this article on Zacks.com click here.