Right now is a good time to be working for Michael Kors, the luxury fashion retailer. The company’s fiscal fourth quarter earnings report is out and showing a 53.6 percent revenue increase, proving that hard work and strong management can outperform the consensus guesswork of jittery, poorly-trained market speculators (by $100 million). Motley Fool has the story. Here are the highlights:
“[T]his unparalleled growth was driven by comparable sales, which increased 26.2 percent, also far better than the 21 percent increase analysts expected. Notably, Michael Kors is the first retail designer of the season to report 20%-plus comparable sales growth.”
On European business’ role in the Michael Kors expansion:
“For fiscal year 2013, Europe accounted for 10% of Michael Kors’ total revenue. But, in fiscal 2014, Europe produced sales in excess of $500 million and now accounts for more than 18% of total sales. Hence, Europe is becoming important for Michael Kors; in the company’s fiscal fourth quarter, it earned $164.6 million, grew revenue 125% year over year, and saw an unprecedented 62.7% comparable-store sales growth.”
All of this is excellent news if you’re already holding stock in Michael Kors Holdings (KORS), but when Motley Fool goes on to flog the stock with buy recommendations and flowery language, it starts to undermine the real, good news they’re presenting, and that is difficult. These numbers scream “buy me” to potential day traders and 401(k) micromanagers, and if the Fool is to be believed, you should.
This writer, however, has a policy against taking stock advice (Michael Kors-related or otherwise) from anyone who claims that the key to riches is to let other people think that one is a misguided and impulsive freak. There’s a reason why animals herd up–it protects them from predators, and the only ones with a “go it alone” mentality are the predators, who require solitude and secrecy in order to feed on those they separate out. So no, perhaps we will not take advice about Michael Kors stock from people who encourage us to wander away from the water hole and toward the tree line.
Readers who doubt this analysis are encouraged to take a close look at what appears to be the closing paragraph of the Michael Kors article, but which is in fact a transparent hustle for the reader to sign up for some kind of secretive, purportedly foolproof get-rich-quick investment scheme that their staffer has apparently put a ton of his own money into. These scams are hardly new, and anyone who has been desperate enough to fall for them can attest to the fact that the huckster’s initial investment was entirely in the advertising that brought out the marks.
Still, Michael Kors is a hot topic, and the numbers don’t lie, even if they are the only thing that doesn’t. Inquisitr has reported before, over the course of years, about the rise of both Michael Kors as a personality and about the company’s continuously stellar performance. The next logical step is the fact-check the Fool’s analysis of Michael Kors’ performance.
An article at Intercooler reveals a more balanced take. Michael Kors Holdings’ growth, as spectacular as it has been, is being viewed by some as nearing the end of its run, at least for now. While most analysts do still rate the stock as a “buy”, with price targets nearly $30 per share above the current value of the stock, there are a hearty portion who are recommending that current owners hold on to what they have, but that the smart timing for purchasing Michael Kors has passed.
This makes sense, in a conservative (small-c) way, since there is very little profit to be had in buying a stock near its peak, since timing the sale to hit that peak without a loss is more difficult the smaller the mark-up is. Anyone who has ever been involved in reselling as a business, at any level from baseball cards to real estate, knows this. Michael Kors, undoubtedly, knows this. Still, the nay-saying is based on the idea that there might be some limit to the growth of Michael Kors Holdings, and there’s been no indicator that that is happening beyond a few party-poopers who point out that there is an absolute cap on market share of 100% and that Michael Kors would have to put a dagger in the back of Louis Vuitton in a Game of Thrones-style coup in order to even get close to accomplishing that.
Read for yourself, from Intercooler:
“Analysts at Buckingham Research raised their price target on shares of Michael Kors Holdings from $112.00 to $118.00 in a research note on Thursday. They now have a “buy” rating on the stock. Separately, analysts at Avondale Partners downgraded shares of Michael Kors Holdings from an “outperform” rating to a “market perform” rating in a research note on Thursday. They now have a $103.00 price target on the stock, down previously from $113.00. Finally, analysts at Telsey Advisory Group raised their price target on shares of Michael Kors Holdings from $102.00 to $110.00 in a research note on Thursday. They now have a “not rated” rating on the stock. One research analyst has rated the stock with a sell rating, five have assigned a hold rating, fifteen have given a buy rating and one has assigned a strong buy rating to the company. Michael Kors Holdings presently has an average rating of “Buy” and an average target price of $105.17.”
These reports show a significantly lower set of expectations than the isolated market movement discussed by the Motley Fool, and since the stock has no dividend payout (and thus, is a worthless holding for purchasers building long-term investment portfolios), cherry-picking data on Michael Kors Holdings is especially dangerous.
Stock advice, like romantic advice, is a dangerous game for a writer to dabble in, and it serves us well to be conservative, lest we ruin friends and isolate our audiences by bankrupting them. Before you rush out to put a buy order on a “bullish” stock, consider whether or not you want to pick your horses by taking recommendations from the bookie. That is all the recommendation that this writer feels comfortable giving after seeing the mixed field of analysis around Michael Kors. It would be great to own the stock around this time, especially if it was purchased for $50 or less, but that usually means it’s not a great time to buy the stock, it’s just a great time for stockholders to talk you into buying.
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