UBS has started coverage on SuperDry PLC (LON:SDRY) with a ‘neutral’ rating and a 500p target as it thinks the fashion retailer’s shares look “fairly valued versus a regression for European apparel peers” following a recent profit warning induced plunge.
In mid-morning trading on Wednesday, the FTSE 250-listed company’s shares were changing hands at 435.40p, down 3.2% on Tuesday’s close.
READ: Superdry shares plunge as it issues profit warning after 'warm weather' hurts trading
In a note to clients, the Swiss bank’s analysts said they see limited upside potential to market expectations even with SuperDry's price/earnings having de-rated from 16x to 7.5x in the year-to-date.
They noted that decelerating group sales growth - from 22% per annum to estimates of 2% for full-year 2019 - has sparked debate over the company's growth potential.
The analysts said the longer-term drivers for Superdry remain clear to them, namely: (1) a strong brand; (2) range extension opportunities; and (3) plenty of market share to go for internationally.
However, as Superdry works through its product imbalances, they forecast a moderation in sales growth to a 4% compound average growth rate for full-year 2018-2022 and limited upside risk to the markets mid-term growth expectations.
The analysts concluded: “Industry precedence highlights opportunities and risks of product strategy Superdry is on the cusp of delivering some important product developments. Once complete, we believe these will position the brand well for future growth.”