Is Canada Goose (NYSE:GOOS) A Buy Before Earnings

A Make Or Break Quarter For Canada Goose

Canada Goose (NYSE:GOOS) is an interesting play on the consumer for many reasons. Not only is it a luxury apparel manufacturer but it is also a seasonal play that is coming up on a hurdle, the Q3 earnings report. The report isn’t expected to be awesome, contrary to consumer trends reported for the holiday season, and could be a make or break moment for the stock. The Q3 period is traditionally the strongest period for the company and needs to be after the first two quarters of the fiscal year. The company posted a not too-unexpected 9.6% decline in the 1st quarter that accelerated to -33% in the 2nd because people just didn’t need to buy warm coats over the summer.

The analysts are expecting a tepid consensus of $334 billion in revenue for the quarter. On a YOY basis, that’s a revenue decline of 1.5%. The good news is that revenue should be up sequentially by triple-digits, just not enough to match the previous year let alone reclaim lost revenue in the first half. The silver lining is that results have outperformed the consensus by a wide margin so far this fiscal year and that is expected again. If the company beats the Q3 consensus with the same 15% to 25% margin it has so far this year revenue could come in as high as $427 million or up 25% YOY. We’ll see when the company reports in the first week of February.

The Analysts Shun Canada Goose, But Should They?

The average analysts rating on Canada Goose took a hit over the past two to three months but that may end up being a good thing for new investors. The small number of downgrades by analysts with current ratings were offset by a few new ratings that equate to a buy/hold position. Within that scenario, the consensus price target is still above the recent price action and implies about a 9% upside.

On the flip-side Baird, which does not currently have a rating on Canada Goose, sees tailwinds that point to a strong start to calendar 2021. The firm did an analysis on 36 popular search terms for winter wear and discovered them up 36% YOY versus a 9% gain in December. The results are underpinned by the recent rounds of cold weather that are expected to persist over the next couple of months.

On a segment basis, Baird says its indexes are strong nearly across the board. Searches for winter activities are up 52%, winter items +31%, and winter brands +20%. Five of the eight winter activities were up triple digits led by sleds +168% with the sharpest improvement in heavier winter items like gloves, boots, jackets, and lined pants. The only downside is that searches for Canada Goose were down 13% for the week. The decline in searches is not a good sign for the company but mitigated by the fact it is ranked in the top five by most website/search-returns for the winter brands search string.

The Technical Outlook: Canada Goose Is Moving Up Within A Range

Shares of Canada Goose hit a high in late 2020 after advancing roughly 50% from the summer support levels. The stock has since pulled back and bounced from support leaving it range-bound but with a bullish bias. The indicators and price action suggest a move up to the top of the range could come before earnings are released with the qualifier that resistance at the $34 needs to be broken. Once that takes place the stock should make a fairly clean move up to retest the $37.50 level but where it goes from there depends on the results.