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Kate Spade: In the Bag
04/30/2015 7:00 am EST
Our latest featured breakout stock sells its clothing and accessories under three brands: Kate Spade New York, Kate Spade Saturday, and Jack Spade, explains Leo Fasciocco, editor of Ticker Tape Digest.
Kate Spade & Co. (KATE) offers apparel, handbags, briefcases, leather goods, jewelry, apparel, footwear, optics, fragrances, electronics cases, fashion accessories, beauty, and home decor products.
KATE's long-term chart shows the stock falling from its all-time high of $46 in early 2007 to an all-time low of $1.46 later in that year. Part of the drop was due to the bear market.
The stock formed a bottom for three years and broke out in early 2012. Since then it has made a four-fold move. More recently, KATE has put down a cup-and-handle base. It is in good position to breakout.
We see KATE's strong earnings outlook being the key driver to send the stock higher. This year, analysts forecast a 134% surge in net to 59 cents a share from 25 cents a year ago.
The stock sells with a price-earnings ratio of 57. That is high but okay given the earnings growth rate this year and next.
Net for the upcoming first quarter should come in at 2 cents a share compared with a loss of 6 cents a year ago. Profits for the second quarter should leap 124% to 11 cents a share from 5 cents the year before.
The Street looks for net for 2016 to jump 66% to 97 cents a share from the anticipated 59 cents this year. We rate KATE a good intermediate-term play, providing earnings meet expectations.
The largest fund holder is the Fidelity Growth Company Fund, 5-star rated, with a 6.4% stake. It was a recent buyer of 12,200 shares.
The largest fund buyer recently was the 4-star rated Goldman Sachs Mid Cap Value Inst. Fund which purchased 1.8 million shares as a new position.
We suggest accumulation of a partial stake in KATE with further buying to be done on a breakout over $35.50. We are then targeting KATE for a move to $44 after a breakout. A protective stop can be placed near $32.50 after a breakout.
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