Let’s take a look at analysts’ morning notes.
URBAN OUTFITTERS (URBN):
- CITI: Repeating its 2006 problems. The inventories are in better shape, but rising costs present a new challenge and there’s little visibility into 2H. Maintain hold and cut target to $34.
- MORGAN STANLEY: Working through fashion shift. We think top-line recovery could be two to three quarters away and that the stock is unlikely to recovery until that point. However we think URBN has one of the best long-term growth profiles in specialty retail.
- GOLDMAN SACHS: Attractive in the long term. URBN has differentiated brands, one of the strongest growth stories in the sector, a strong leadership team that combines merchant and financial talent and with the right time horizon the story is attractive. However we are neutral because we see further sales/margin deterioration as a risk to stock performance.
- OPPENHEIMER: Weakness is a buying opportunity. Its 4Q EPS reflected a difficult retail environment and higher-than-expected tax rate. While we expect near-term pressure as URBN clears through excess inventories and navigates the fashion shift, these should largely be resolved for back-to-school.
- PIPER JAFFRAY: Initial demand for iPad 2 will be strong but lines at Apple retail stores could be shorter than lines for the first. Apple will reach sales of 1 million iPad 2s faster than the 28 days it took to sell 1 million first generation iPads. We believe concern for weak initial demand stemming from the short lines at the Verizon iPhone launch are unfounded. While it is hard to quantify we see the iPad 2 as an evolution of the original iPad not a revolutionary version.
- GOLDMAN SACHS: Strong outlook. Global innovation, focus on performance and style productivity and its insulation from inflation will help drive growth. Key risks include the weakening of global demand trends and sharp dollar strengthening.
AMERICAN EAGLE (AEO):
- RBC: Promising growth. Traffic trends during February were not overly strong. It may take the upcoming and important spring catalysts (improving weather, Easter and spring break season) to drive customers back into stores to see and react to the updated product.
WESTERN DIGITAL (WDC):
- BMO CAPITAL: Bullish. The acquisition of Hitachi is beneficial for all players including STX owing to some share leakage. The deal will create shareholder value for both STX and WDC. Evern with weak market fundamentals, WDC will be able to generate material earnings growth. Net, we believe that this deal will serve as both an industry and company restructuring – a positive.
- BAIRD: Staying neutral. Current industry conditions are challenging and we have low expectations for June quarter guidance.
- COWEN: Poised for outperformance. After three years of playing defence during the downturn we expect management’s recently announced offensive measures, which will be executed within an improved macro-economic backdrop, to help F2011 comps. We view SONC shares as undervalued.
- CITI: Some turbulence but not a crash. An almost 40% correction has created an excellent entry point/valuation level for Expedia, still one of the leading global online travel assets. EXPE also presents as the Best Value Play among internet stocks.