2 Under-The-Radar Retail Upgrades That Shouldn't Be Ignored

Two Retail Winners For The Second Half Of 2021

While the mainstream media is focused on the bigger more important issues at hand the stock market is quietly going about its business. Part of that business is upgrading and downgrading stocks and Monday's news included two upgrades that we find interesting. Both are discretionary names in high demand and both are positioned to leverage revenue gains later in the year. Tight inventories and a heavily reduced discounting environment will not only drive revenue growth but profitability as well.

Children's Place Is The Place To Get School Clothes

Children's Place NASDAQ: PLCE just got an upgrade to buy from neutral at B Riley Securities. Analyst Susan Anderson and her team think school uniforms will be in high demand this year and we agree. While COVID-19 will most likely impact school function this year, we don't think they're going to close the schools down like they did last year. A recent Google search trend analysis showed searches for school uniforms were up more than 400% from earlier in the year reinforcing the idea uniforms are in hot demand. 

"Additionally, our store and online checks show higher prices on upgraded features in key items such as stretch denim as well as new fashion items such as girl's sweaters, as well as lower promos as inventory remains lean,"

Ms. Anderson also increased the price target to $130 from $92 Implying about 28% upside. This compares to a consensus closer to $80 but the trend in sentiment is definitely higher. The consensus price target has more than doubled in the last 90 days and the high price target is at $150. In our view, Children's Place is aided by its e-commerce presence and should easily be able to outpace the analyst consensus both this reporting season and next. We are expecting the analysts to begin increasing their earnings and revenue estimates as well as up their price targets very soon. Children's Place reports earnings later this week.

Canada Goose Isn't Cooked Yet

Canada Goose NYSE: GOOS already reported earnings and shares tanked in the wake of the news. The problem is not that the company reported strong year-over-year growth and beat the consensus estimates, and provided a strong outlook, it's that margin took a small hit. The bad news for holders of the stock Is that Canada Goose is down about 22% from its recent highs. The good news for both holders of the stock and would-be investors is that the sell-off is a technically healthy move that closed an open price window that formed earlier in the year. With the price window closed, and the revenue outlook robust, it is just a matter of time before this stock regroups and begins moving higher.

The analysts at Evercore ISI agree with us and have defended their position in Canada Goose. They call the stock a top pick amongst their small and mid-cap favorites and assign a price target of $60. That's an upside of roughly 60% and compares to the consensus price target expecting an upside of only 25%. The analyst activity in Canada Goose has been mixed over the past two to three months, the consensus sentiment is hold but the price target has been creeping higher. We think it will be much higher by the end of the year. 

"Canada Goose's huge long-duration growth opportunity is not adequately captured by the current valuation. Growing up in the post digital era has allowed Canada Goose to pursue a truly digital-first, DTC centric strategy, which means the company can expand globally in a highly profitable yet brand-relevant way (ecomm has gone from 4% to 40% since 2015). And the luxury outerwear market is anything but a bubble with both Canada Goose and Moncler combined having only sold 6-7 million jackets over the last five years cumulatively."