Posted on Wednesday, 20th January 2010 by admin
Coach Inc. (COH) is one of those plays that makes you smile, due to its sweet-spot market position, and it goes without saying that I’m reiterating my buy rating for the company’s shares, first recommended on April 13, 2009 at a price of $18.22.
If you bought COH in April 2009, you’re up an impressive 90%. If you didn’t, don’t fret: there’s more upside ahead with Coach.
Coach, a leading designer and marketer of high-quality accessories, is bucking the ‘frugal consumer’ trend in the U.S. via to its lucrative niche: ‘accessible luxury.’
The latest Coach positives? Look for 5-7% revenue growth in 2010. Handbag penetration is increasing, and expansions in the Japan and China markets will enhance global market share gains in the years ahead. Just as significant: Coach has prudently decreased prices on selected items; even so, profit margins remain impressive. The First Call FY2010/FY2011 EPS estimates for COH are $2.08 to $2.28.
Technically, Coach’s stock chart is about as strong as a chart can get — an uptrend with only minor, constructive pull-backs. There will be psychological resistance at $40, but this should prove to be minor. Further, a recent pull-back is a Buy opportunity.
2010 Outlook: Coach is a long-term play, but if you’re looking to sell COH within the year, take your profits after it rises to $47-49, if it fails to rise above $50.
Stock Analysis: Coach Inc. is a moderate-risk stock. If you’ve already purchased the company’s shares, hold them. If not, consider buying a 25% position in COH now; then buy another 25% in one month, if U.S. and global economic conditions don’t worsen substantially. Under any circumstance, don’t buy more than 75% of your COH position before March 2010. Sell/Stop Loss if you were to buy shares in this company: $18.50.
Disclosure: Lazzaro has no positions in stocks, but does own shares in two Pimco Bond Funds: PHDAX and PYMAX.
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