Wells Fargo Upgrades Abercrombie & Fitch to “Outperform” on Strong International Business (ANF)
Teen clothing retailer Abercrombie & Fitch Co. ( ANF ) on Monday caught a big upgrade from analysts at Wells Fargo, who cited the company's strong high-margin international business.
The firm said it boosted its rating on ANF from "Market Perform" to "Outperform," while raising its valuation range to $56-59 to $66-71. That new range implies up to a 29% upside to the stock's Friday closing price of $54.89.
A Wells Fargo analyst commented, "We believe that growth in ANF's high-margin international business will accelerate over the next few years (through a faster pace of store openings), diversifying the company's earnings streams away from the difficult U.S. teen market. We expect that the U.S. business stabilizes in the next few years, however, at lower levels of profitability than before (~10% operating margin vs. 20% historical peak) given lower average unit retails and a higher product cost environment going forward. Our '10/'11 EPS estimates are $1.99/$3.10; we are introducing our '12 EPS est. of $4.15."
Abercrombie shares rose 65 cents, or +1.2%, in premarket trading Monday.
The Bottom Line
Shares of Abercrombie & Fitch ( ANF ) have a 1.28% dividend yield, based on Firday's closing stock price of $54.89. The stock has technical support in the $50 price area. If the shares can firm up, we see overhead resistance around the $58-$60 price levels.
Abercrombie & Fitch Co. ( ANF ) is not recommended at this time, holding a Dividend.com DARS™ Rating of 3.4 out of 5 stars.
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