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MarketBeat Week in Review – 2/19 - 2/23
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West Africa bloc lifts coup sanctions on Niger in a new push for dialogue to resolve tensions
West Africa's ECOWAS bloc says it's lifting sanctions imposed on Niger over last year’s coup in a new push for dialogue
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Macron booed by French farmers who blame him for not doing enough to support agriculture
MILAN FASHION PHOTOS: Ferragamo, Dolce&Gabbana conceal and reveal, balance transparency with cover
S&P 500   5,088.80
DOW   39,131.53
QQQ   436.78
Warren Buffett uses his annual letter to warn about Wall Street and recount Berkshire's successes
CEO of America's biggest bank has stern warning (Ad)
MarketBeat Week in Review – 2/19 - 2/23
A collection of the insights Warren Buffett offered in his annual letter Saturday
CEO of America's biggest bank has stern warning (Ad)
West Africa bloc lifts coup sanctions on Niger in a new push for dialogue to resolve tensions
West Africa's ECOWAS bloc says it's lifting sanctions imposed on Niger over last year’s coup in a new push for dialogue
The AI Singularity Clock Is Ticking (Ad)
Macron booed by French farmers who blame him for not doing enough to support agriculture
MILAN FASHION PHOTOS: Ferragamo, Dolce&Gabbana conceal and reveal, balance transparency with cover
S&P 500   5,088.80
DOW   39,131.53
QQQ   436.78
Warren Buffett uses his annual letter to warn about Wall Street and recount Berkshire's successes
CEO of America's biggest bank has stern warning (Ad)
MarketBeat Week in Review – 2/19 - 2/23
A collection of the insights Warren Buffett offered in his annual letter Saturday
CEO of America's biggest bank has stern warning (Ad)
West Africa bloc lifts coup sanctions on Niger in a new push for dialogue to resolve tensions
West Africa's ECOWAS bloc says it's lifting sanctions imposed on Niger over last year’s coup in a new push for dialogue
The AI Singularity Clock Is Ticking (Ad)
Macron booed by French farmers who blame him for not doing enough to support agriculture
MILAN FASHION PHOTOS: Ferragamo, Dolce&Gabbana conceal and reveal, balance transparency with cover
S&P 500   5,088.80
DOW   39,131.53
QQQ   436.78
Warren Buffett uses his annual letter to warn about Wall Street and recount Berkshire's successes
CEO of America's biggest bank has stern warning (Ad)
MarketBeat Week in Review – 2/19 - 2/23
A collection of the insights Warren Buffett offered in his annual letter Saturday
CEO of America's biggest bank has stern warning (Ad)
West Africa bloc lifts coup sanctions on Niger in a new push for dialogue to resolve tensions
West Africa's ECOWAS bloc says it's lifting sanctions imposed on Niger over last year’s coup in a new push for dialogue
The AI Singularity Clock Is Ticking (Ad)
Macron booed by French farmers who blame him for not doing enough to support agriculture
MILAN FASHION PHOTOS: Ferragamo, Dolce&Gabbana conceal and reveal, balance transparency with cover

V.F. stock is a turnaround story hiding in plain sight

photo of blonde woman looking over clothes on apparel rack

Key Points

  • There is a performance gap in apparel and consumer stocks that you could squeeze out today for a few percentage points of upside. 
  • Very quickly, you can see how V.F. stock could become the industry favorite with the best turnaround narrative in the group.
  • Analysts see the double-digit upside, and markets accept the growth in EPS projections today; don't fight the market.
  • 5 stocks we like better than Abercrombie & Fitch

Today's stock market is not what you may have gotten used to from 2020 through 2023. For most of that time, technology stocks ruled the land due to their hypergrowth projections and attractive propositions. The epitome of this market preference can be seen in the price action for NVIDIA NASDAQ: NVDA. The stock kept breaking past all-time highs to trade at a massive 95x P/E ratio.

So, where can you find additional upside after the S&P 500 and the NASDAQ indices have both been hitting all-time highs? Well, you can see some room to squeeze returns by spreading out the performances between the Technology Select Sector SPDR Fund NYSEARCA: XLK against the Consumer Discretionary Select Sector SPDR Fund NYSEARCA: XLY, which would come to be a vast 27.4% gap in favor of tech.

You also have to consider that the FED will likely cut interest rates this year, which, according to the FedWatch tool at the CME Group NASDAQ: CME, could come as soon as May. When rate cuts become imminent, large investors and traders may start to bargain hunt for turnaround plays within the consumer discretionary names since they tend to do well during low interest rate environments. Here is why  V.F. NYSE: VFC could quickly become a prime target.


The story fits

Remember that the narrative here is mainly focused on turnarounds. This is where you seek a trend that is quickly going into a potential expansion after a brief – or net – period of contraction.

Do you want to know how the big players on Wall Street pick the industries and sectors to invest in before they move? Here's the start. Following a 'top-down' research process, you can start by reviewing the ISM manufacturing PMI index trends. This will make it very clear to you why apparel stocks may be in play today.

Over November and December, the apparel and textile mills industries saw heavy contractions, which could be blamed on the industry's seasonality. Still, it was more of a desperate attempt to clear out built-up inventory.

Have you been getting emails for up to 40% discounts from Ralph Lauren NYSE: RL? Because it has been only one of several brands trying to move items out of their stores. The struggle could be over for these names, as the major PMI trends have taken a wild turn to start the 2024 year.

For January, the apparel industry reported the most growth out of the 18 sectors the report keeps tabs on. Coming in second, textile mills also came in an expansion, which does check out since they will likely be pumping out more materials to meet the newfound breakout for their apparel customers.

Here is where things get a bit more complex. While most retail investors and traders will focus on the bigger names like Abercrombie & Fitch NYSE: ANF, the real juice – that is worth the squeeze – is found in names like V.F. and even Foot Locker NYSE: FL and Under Armour NYSE: UAA.

How to pick 'em

Abercrombie stock grew its earnings per share by a decent 46.5% in the past twelve months. Here's why you can disqualify this stock from your turnaround suspects. Analysts expect this stock to grow its EPS by only 6.4% in the next twelve months, which is significantly slower than the company did last year.

That may be why these same analysts see a net downside of 36.9% from today's prices, based on their $69.4 share price target, far from a turnaround.

For Foot Locker and Under Armour, there are signs of a potential turnaround in that they are both turning an EPS contraction from the past twelve months into an expansion for this year. Foot Locker saw falling EPS of 31.8% in the last twelve months, whereas analysts expect to see growth of 48.2% this year.

With a $26 a share price target, though, Foot Locker analysts see an 11.3% downside in that stock.

Under Armour's earnings declined by 18.3% in the past year, and analysts reward this name with a 22.4% upside for the next twelve months to bring you another turnaround prospect. For reasons kept by Wall Street, analysts are more bullish on this name with their $9.9 a share price target, implying a rally of 22.6% from today's price.

Now, why and how is V.F. a better choice here? With an EPS decline of 14.1% last year, analysts think 2024 could be much different at 28.1% growth. A price target of $18.7 a share also brings you a potential upside of 22.2%; so far, nothing stands out from the rest of the peers except this.

The price-to-book valuations for Foot Locker and Under Armour are 0.9x and 1.7x, respectively, below the industry average of 3.1x. Remember the saying, "It must be cheap for a reason." Don't put yourself at risk to find out what that reason is. Instead, check this out.

V.F. stock sells for 3x P/B to align with the rest of the industry, meaning that markets are more accepting of the potential turnaround being proposed by analysts in the company's EPS and price targets. As you may know – perhaps by painful mistakes -  you should never fight the market.

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Should you invest $1,000 in Abercrombie & Fitch right now?

Before you consider Abercrombie & Fitch, you'll want to hear this.

MarketBeat keeps track of Wall Street's top-rated and best performing research analysts and the stocks they recommend to their clients on a daily basis. MarketBeat has identified the five stocks that top analysts are quietly whispering to their clients to buy now before the broader market catches on... and Abercrombie & Fitch wasn't on the list.

While Abercrombie & Fitch currently has a "Hold" rating among analysts, top-rated analysts believe these five stocks are better buys.

View The Five Stocks Here

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Companies Mentioned in This Article

CompanyMarketRank™Current PricePrice ChangeDividend YieldP/E RatioConsensus RatingConsensus Price Target
Technology Select Sector SPDR Fund (XLK)N/A$205.29-0.2%0.63%20.04HoldN/A
Consumer Discretionary Select Sector SPDR Fund (XLY)N/A$181.29-0.5%0.77%N/AHold$0.07
Foot Locker (FL)
3.3134 of 5 stars
$35.15+3.1%N/A42.35Reduce$26.26
NVIDIA (NVDA)
4.5134 of 5 stars
$788.17+0.4%0.02%66.01Moderate Buy$820.03
Under Armour (UAA)
3.4033 of 5 stars
$8.43+0.4%N/A9.37Hold$9.92
V.F. (VFC)
4.3678 of 5 stars
$15.98+0.5%2.25%-8.11Hold$18.70
Ralph Lauren (RL)
4.4704 of 5 stars
$188.44+0.7%1.59%21.37Moderate Buy$151.55
CME Group (CME)
4.6001 of 5 stars
$217.960.0%2.02%24.57Hold$214.22
Abercrombie & Fitch (ANF)
2.4996 of 5 stars
$122.82+1.3%0.65%30.71Hold$69.43
Compare These Stocks  Add These Stocks to My Watchlist 

Gabriel Osorio-Mazilli

About Gabriel Osorio-Mazilli

  • gosoriomazzilli@gmail.com

Contributing Author

Value Stocks, Asian Markets, Macro Economics

Experience

Gabriel Osorio-Mazilli has been a contributing writer for MarketBeat since 2023.

Areas of Expertise

Value investing, long/short trading, options, emerging markets

Education

CFA Level I candidate; Goldman Sachs corporate training; independent courses

Past Experience

Analyst at Goldman Sachs, associate at Citigroup, senior financial analyst in real estate


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