© Reuters. Carter’s (CRI) sentiment leans bearish, UBS analyst sees a negative catalyst ahead
By Sam Boughedda
UBS sees a negative catalyst ahead for Neutral-rated Carter’s (NYSE:), analysts told investors in a note previewing the company’s first-quarter earnings release.
The analysts, who have a $65 price target on the stock, told investors that the firm expects Street EPS estimates to fall and sentiment to weaken.
“We believe a tough macro environment plus unfavorable weather will cause CRI to deliver a small 1Q23 EPS miss, offer weak 2Q23 EPS guidance, and lower its FY23 outlook slightly,” said the analysts.
They added: “As a result, we think the Street revises down its FY23 EPS estimate slightly. We also think a weak report weighs on sentiment, causing CRI’s 12x FY1 P/E to slide toward its ~10.5x past 1-year average. The options market is pricing in a +/- 7.3% jump over the event vs. 4.8% historical avg. move. We expect less volatility than 7.3% since sentiment already leans bearish. We think this limits downside over the event.”
The analysts also explained that the sentiment leans bearish, with UBS’ quant team crowding data revealing that CRI is relatively short-crowded vs. the Softlines average.
“CRI has become increasingly short-crowded over the last few weeks. In addition, CRI’s short interest has been creeping up, and its option price skew is trending toward steepening,” wrote the analysts. “Lastly, the stock has underperformed the by 1300 bps YTD. These data points suggest sentiment leans bearish.”
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