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Why Canaccord Genuity and Telsey Advisory Reduced Foot Locker’s Price Target

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Price movement of Foot Locker

Foot Locker (FL) has a market cap of $7.9 billion and fell by 1.3% to close at $54.08 per share on May 23, 2016. The stock’s weekly, monthly, and YTD (year-to-date) price movements were -8.8%, -10.5%, and -16.2%, respectively, as of the same day. This means that FL is trading 9.9% below its 20-day moving average, 12.5% below its 50-day moving average, and 17.6% below its 200-day moving average.

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Related ETFs and peers

The Vanguard S&P Mid-Cap 400 Growth ETF (IVOG) invests 1.1% of its holdings in Foot Locker. The ETF tracks a market-cap-weighted index of growth companies culled from the S&P 400. The YTD price movement of IVOG was 2.2% as of May 23, 2016.

By comparison, the Vanguard Small-Cap ETF (VB) invests 0.15% of its holdings in Foot Locker. The ETF tracks the CRSP US Small Cap Index, a market-cap-weighted index that includes the bottom 2%–15% of the investable universe.

The market caps of Foot Locker’s competitors are as follows:

  • Wal-Mart Stores (WMT)—$216.1 billion
  • DSW (DSW)—$1.8 billion

Canaccord and Telsey

Canaccord Genuity has reduced the price target of Foot Locker to $75 from $81 per share and has rated the stock as a “buy.” Telsey Advisory Group has also reduced Foot Locker price target to $72 from $78 per share and has maintained the stock rating as a “buy.” TheStreet Ratings has rated Foot Locker as a “buy” with an “A-” score.

Performance of Foot Locker in fiscal 1Q16

Foot Locker reported fiscal 1Q16 sales of ~$1.98 billion, which is a rise of 3.7% as compared to sales of $1.91 billion in fiscal 1Q15.

Its net income and EPS (earnings per share) rose to $191.0 million and $1.39, respectively, in fiscal 1Q16, as compared to $184.0 million and $1.29, respectively, in fiscal 1Q15.

Foot Locker’s cash and cash equivalents and merchandise inventories rose by 7.7% and 2.1%, respectively, in fiscal 1Q16, as compared to 1Q15. Its current ratio rose to 4.5x, and its debt-to-equity ratio fell to 0.40x in fiscal 1Q16, as compared to a current ratio and a debt-to-equity ratio of 3.6x and 0.42x, respectively, in fiscal 1Q15.

During fiscal 1Q16, the company repurchased 1.4 million shares worth ~$88 million. It also opened 32 new stores, remodeled or relocated 55 stores, and closed 19 stores.

Now let’s take a look at Toyota Motor (TM).

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