Canada Goose (NYSE:GOOS) Down On Earnings, But The Time To Buy Is Now

It Was A Bad Quarter, But That Was Expected

Canada Goose (NYSE:GOOS) did not report a great quarter, but that was expected. The company saw its revenue fall -63.3% from the previous year as demand for high-end, luxury outerwear virtually dried up. The salient point for investors is that, although demand dried up, results were much better than expected. More than 65% better. And the 1st quarter is always this company’s worst Think about it, Canada Goose sells expensive cold-weather gear, the season after Christmas when the weather gets warmer isn’t when people buy their winter coats.

What investors should be worried about is the outlook for the rebound. There is a high-expectation for Canada Goose to post a strong rebound in the second half of the year because of four things. The first is the company’s natural seasonability which sets it up to gain strength into the end of the year. The second is the economic rebound that is underway and gaining strength. Regardless of the risks with COVID, the data suggest an economic acceleration is underway. The third is economic stimulus, the world’s leaders are still stimulating COVID-struck economies and the U.S. is expected to pass another spending bill soon.

This Is Why You Should Love Canada Goose

There are lots of reasons to like Canada Goose. It’s a great brand, it’s got a solid focus on ESG and sustainability, it’s got a healthy growth outlook, the CEO is fantastic and they make good clothing. The reason why you should love Canada Goose is the fourth reason why the company is expected to post a strong rebound in the second half of the year. eCommerce.

The company has been, over the last decade or so, shifting toward a more-direct to consumer model. Up until very recently that meant company-owned brick&mortar locations that are, understandably, not doing so great right now. Canada Goose CEO Dani Reiss has been shifting the mix towards eCommerce and those efforts are accelerating. Considering the strength of eCommerce trends in the post-pandemic world I’d say he has no choice, not if he wants this company to thrive.

“Adversity demands change drives innovation and reveals winners. For Canada Goose, that has never been more true than today, as we begin to see signs of recovery around the world, heading into our most important season,” said Dani Reiss, President & CEO. “Today’s reality has reinforced long-standing pillars of Canada Goose’s DTC strategy: globally scalable in-house e-Commerce and omnichannel innovation. With digital adoption rising rapidly, the Company has increased and accelerated investments in these areas going into the Fall / Winter season.”

The Analysts Like Canada Goose, And It’s Trading At A Deep Discount

The analysts aren’t unanimous in their opinion but they are overwhelmingly bullish. Of the 16 current ratings 9 are very bullish and only 2 bearish. The most recent to speak out, BTIG, cites two more catalysts for share prices investors should be aware of. First, the company is expected to see a nice tailwind in China where domestic consumption is expected to rise. The second is the possibility the brand will be taken private or bought out by a larger company, VF Corporation was specifically mentioned.

The consensus target is near $37.50 which, notably, is a significant premium to current prices. Today’s news has the shares down more than -7.0% in the premarket session putting them at $23. The $23 level is consistent with support along the short-term moving average where a rebound may form.

A rebound back to the $37.50 level is equal to nearly 60% and possibly only the beginning of a much larger move to come. In the near-term, investors interested in this stock are urged to use caution and small entries until support is confirmed at or near the $23 level. If price action falls below $23 and the short-term EMA a pull-back to the $20 looks likely.