One exception to this fickle retail trend, at least so far, is a fashion stock that's been nearly universally embraced by style mavens and stock mavens alike, and that company is Michael Kors (NYSE: KORS).
Hong Kong-based Michael Kors (named after the company's founder and head designer) has been a stellar example of a company with outstanding fundamentals and incredible share price performance.
In its most recent earnings report (fiscal Q3), the company crushed it, reporting earnings per share (EPS) of $1.11, a 73% spike from the same quarter the prior year. The consensus EPS estimate was just $0.86. Revenue also beat analysts' $860 million estimate by a wide margin, with the company crossing the $1 billion threshold for the first time. The $1.01 billion in sales for the quarter represented a 59% year-over-year increase.
Not surprisingly, KORS soared on the news, jumping more than 17% on Feb. 4. Since that big spike, shares of the luxury goods retailer have essentially flatlined, up about 1% over the past 11 weeks.
The recent plateau in KORS' upward trajectory is something I think smart traders should view as an opportunity to get long the stock before the next big move higher.
One reason for my optimism here has to do with history.
As my former colleague at Investor's Business Daily, Nancy Gondo, recently observed regarding KORS, "The stock has come a long way since its debut on Dec. 15, 2011, when it jumped 21% from its offering price of $20 a share. It rose 15% after clearing its first true base at $50.79 in August 2012, then went on to form two more patterns before going on a 29% run. It paused to start its flat base in December 2013."
The lesson here is that KORS has become a darling of the investor/trading class, and the stock has demonstrated that it will surge, build a base, surge again, build a base, and so on. That's the basic pattern that's lifted the stock more than 350% since its debut, and it is one that I suspect will continue for some time to come until Michael Kors' products are no longer embraced by the fashion-conscious set.
For traders, that means now is the time to get long this basing period, especially before the company reports its fiscal Q4 earnings in late May.
Recommended Trade Setup:
-- Buy KORS at the market price
-- Set stop-loss 8% below entry price
-- Set initial price target at $109.39 for a potential 20% gain in four months
-- Set stop-loss 8% below entry price
-- Set initial price target at $109.39 for a potential 20% gain in four months
By Jim Woods
No comments:
Post a Comment