|Written by GSCR Staff|
|Tuesday, 17 March 2015 05:52|
Happy St. Patrick’s Day! No matter what your ethnicity or religion, this holiday has evolved into a celebratory day for a lot of people who are neither Irish nor Catholic.
Right now we are on a consumer apparel kick and some of the staff participated in some of the pre-revelry this weekend. We saw more custom St. Patrick’s Day t-shirts with slogans like “World’s Tallest Leprechaun”, “I Love Shenanigans” and several others not suitable for family viewing. Clearly, people are still spending money on certain items, and we believe consumer apparel is one of them.
A company that has never shied away from risqué ads or trying to get the hip young consumer is Abercrombie & Fitch Co. (NYSE – ANF - $20.51). The clothier’s stock has been hammered since the start of late summer and has been cut in half in price point as the figure below illustrates.
ANF 1-Year Chart
We believe a trade could be in order here from a technical aspect first. A support level of $19.87 confirms a possible buying opportunity. Secondly, a Relative Strength Index of 29.1 also is an indication of being oversold, as the 30 number normally constitutes this for this metric.
On the fundamental side, a forward P/E of 16 versus the trailing number of 28 is a nice check mark for ANF. Gross margin of 62% versus an industry average of 45% is a solid indication that the Company can still charge a higher premium for its trendy products.
ANF looks to be a solid short term play on consumer apparel pop. We think the stock climbs to $23 be 3Q15.
Have a great day!
Disclosure: Goldman Small Cap Research analysts are neither long nor short these shares but may elect to purchase the stock within the next 48 hours.
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