HanesBrands (HBI) Keeps Improving its Fit, Looks Like a Solid Buy

If you're looking for comfort in clothing, a great place to start is with HanesBrands (NYSE: HBI). If you're looking for a little more comfort in your portfolio, buying HanesBrands stock might be just the thing. We last took a look at this stock last week, and while things were already looking up back then, improvements in the fit of this stock have only kept pace.

What a Difference a Week Makes

Just last week, when we talked about HanesBrands, we noted a company that hadn't been doing too well, but was showing obvious signs of improvement. While it had been underperforming the S&P 500 (NYSEARCA: SPY), it was holding, and even raising, its share price fairly well.

The company hit a peak of $14.01 on June 9, following the appointment of a new CEO, Stephen B. Bratspies, who was set to take over the company August 3. This may have been something of a premature move, as just one day after that declaration, news emerged that the current CEO, Gerald W. Evans Jr., won a 2020 C-Suite Award from the Triad Business Journal, citing him as one of the “most-admired CEOs” in the Piedmont Triad region of North Carolina.

The company also has been hard at work making coronavirus-related apparel; it's provided over 20 million gowns to the US government and brought over 450 million cloth face masks to the table. It's even expanded that cloth mask line to consumers, which, given the recent moves toward universal masking, should do well given the circumstances.

Despite this development, HanesBrands has lost a bit of ground since that last peak, closing trading yesterday at $11.46. That may not sound like a great development—losing ground in the stock price seldom is—but the word out of the analysts is what's proving the biggest surprise.

The Analysts Are Increasingly Happy

The biggest news of the last week or so for HanesBrands is that Wells Fargo Securities bumped up its estimation of the company, taking it from “neutral” to “outperform.” Wells Fargo saw pretty much the same thing we saw last week: with retail stores  reopening throughout the United States, “basic apparel” is making the fastest comeback.

Yet Wells Fargo Securities' appraisal was not made in isolation. Credit Suisse made the exact same upgrade—from “neutral” to “outperform”—earlier this morning. It's also got a new price target on the company, a surprisingly upbeat $15, upgraded from the earlier target of $13 per share.

That's not even the most optimistic target out there. B. Riley FBR's research from about three weeks ago put a price target of $14 on the stock, but also kept is “buy” rating in place. Some have been less optimistic, with UBS Group giving the stock a “neutral” rating and putting its price target between $9 and $9.50 a share. ValuEngine, however, raised the stock from “sell” to “hold,” a development worth considering.

Looking at the largest picture of analyst thought out there on HanesBrands, there's a fairly even split between “sell” and “buy” with three analysts each suggesting same, and the remaining seven are out with a “hold” rating.

Time to Stock Up on HanesBrands?

Perhaps the biggest driver in the company's favor comes not from analysts—though that's certainly solid enough for considering—but rather from its overall performance. Shares of HanesBrands have outpaced the industry for the last three months, gaining 20.7% against the industry's 20.3%. Not a huge lead, but a lead nonetheless, and one that pulls the whole average up with it.

Basically, with retail stores open, customers are getting an opportunity to restock their larders and closets, and they're taking it, to varying degrees. With telecommuting becoming an increasingly large part of business operations since the coronavirus kicked in, the need for a suit has declined, much to the detriment of firms like Brooks Brothers and Men's Warehouse (NYSE: TLRD), both of which have either filed for bankruptcy recently or are said to be considering it.

Additionally, as we noted previously, the pandemic put comfort ahead of style by a wide margin. Since people largely weren't allowed to leave their houses anyway by anything more than a video chat or for that “essential” business, no one particularly cared about people leaving the house in sweats. With HanesBrands including a range of names in the “comfort” lineup—including Champion, Playtex and more—and commonly appearing in the “essential” stores like Target (NYSE: TGT) and Walmart (NYSE: WMT), backed up by brisk online operations, HanesBrands could effectively keep running with little impact from the pandemic.

The regression away from suits and even “business casual” has driven a new revolution in clothing, and the revolution will be surprisingly comfortable. HanesBrands is well-positioned to dominate the sartorial new normal, and picking up some HanesBrands stock might be an excellent fit for your portfolio...and a comfortable fit at that.