It’s time to breakdown a luxury retail name that has been on the comeback. Here is the breakdown on $CPRI, otherwise known as Capri Holdings.
Current Price: $39.19
52/Wk High: $39.92
52/Wk Low: $5.42
Market Cap: $5.9 billion
Read below for the breakdown!
Capri Holdings is a major luxury fashion group consisting of iconic brands such as Versace, Jimmy Choo, and last but not least Michael Kors.
Throughout 2020 $CPRI took a major hit due to COVID-19 fears but is now on the way back, making a 127% run in just the last three months.
The major drop Capri Holdings took in the March pandemic crash was warranted in many ways though, given the huge hit earnings have taken since.
While the stock has gone on a major run in the short term, long term opportunity continues to be present.
Taking a look at the numbers Capri Holdings reported a Q2 2021 beat, with an EPS of $0.90 versus the EPS consensus estimate of $0.04.
Furthermore, revenues dropped 23.0% to $1.1 billion in Q2, improving from the first quarter but still extremely negative. On the otherhand e-commerce sales continued to improve through a 60% increase.
Capri Holdings also reported a Q2 gross profit of $710 million and a gross margin of 64%. While profit is down year over year the company’s gross margin did improve.
Income from operations came in at $153 million, up from the minimal $75 million in the prior year. Net income also improved to $122 million, up from the previous year’s level of $73 million.
Management also noted throughout the Q2 report that Capri Holdings saw positive sales in both China and global retail segments.
When it comes to margin management explained that adjusted gross margin expanded by 220 basis points and adjusted operating margin expanded 240 basis points.
Management continued to maintain positivity in the Q2 report, “We are uniquely positioned to drive multiple years of strong growth as we continue to execute on our strategic initiatives,” CEO John Idol said.
Finally, management did not deliver guidance going forward, noting the instability of their outlook due to the COVID-19 pandemic.
Digging into the balance sheet, the numbers are not bad but could be improved.
Total Debt: $1.781 billion
Total Liabilities: $5.604 billion
Total Assets: $7.803 billion
Cash & Short Term Inv: $238 million
On a valuation basis, the stock is still relatively attractive.
Price to Sales: 1.36x
Price to Book: 2.68x
Price to Cash Flow: 8.40x
When it comes to management performance, leadership has been challenged.
Return on Equity: -17.33%
Return on Assets: -4.96%
Return on Invested Capital: -6.28%
Taking in the numbers the analysts are relatively bearish on Capri Holdings with the mean price target sitting at $31.93/share, representing a -18.27% loss.
Capri’s high price target is $50.00/share, representing a 27.98% gain, while the low price target is $20.00/share, representing a -48.81% loss.
The big money on the otherhand is quite involved with 83.95% of Capri Holdings being owned by institutions. Top holders include BlackRock Institutional Trust, The Vanguard Group, and Invesco Advisors.
From a technical front, $CPRI has gone on a huge run in recent months. According to the six-month charts, the MACD continues to move upward within a very tight range around 3.56.
Furthermore, the six-month charts are indicating an RSI of 80.98 and CCI of 104.05. It is also important to note that $CPRI is at a major resistance around $40/share, and a break above that could signal higher highs.
Overall, long term $CPRI looks like a solid buy given the US recovery from the pandemic. In the short term, the stock has gone on a huge run, and waiting for a pullback may be the best course of action.
EAT - SLEEP - PROFIT
Disclaimer: This is not direct financial advice, simply an opinion based on independent research.