Guess?, Inc. (NYSE:GES), the global apparel retailer, has been making remarkable strides in recent years under renewed leadership. The company has managed a successful strategic shift towards affordable luxury, resulting in improved profitability margins, and driving the shares up over 34% in the past year. Yet, with the shares trading in value territory, investors will look to the upcoming Q4 and Fiscal 2024 results to further validate this upward trend, potentially acting as a catalyst driving GES stock to higher (or lower…I see you short sellers) levels.
Turn Around
Guess is a global leader in apparel retail, enjoying a significant footprint in over 100 countries. With over $2.5 billion in annual revenues, the company is renowned for designing, marketing, distributing, and licensing a wide range of lifestyle collections under multiple brands, including GUESS, Triangle Design, MARCIANO, GUESS Kids, Baby GUESS, etc.
Guess has demonstrated an impressive turnaround over the past few years. Under its new leadership, the company has pivoted towards affordable luxury and enhanced profitability margins. The company has effectively implemented cost reductions and honed operational efficiencies that have paved the way for sustained profitability.
The company recently announced the acquisition of the New York-based fashion brand Rag & Bone – the first-ever acquisition in Guess’s 43-year history.
Recent Results and Future Outlook
Amid the volatile apparel industry, Guess could present an intriguing investment opportunity for calculated risk-takers. Despite notable shifts in consumer habits and broader economic uncertainties, Guess has demonstrated promising growth, with shares gaining over 32% in the past year.
Not everyone is sold, however. The stock has a high short interest of just under 27%, though with a short interest ratio of 13.51 days, it could be a potential candidate for a short-squeeze scenario.
The company will release its financial results for the fourth quarter and fiscal year 2024 on March 20, 2024. Current estimates are for an EPS of $1.65.
Where the Stock Stands Now
Over the past 90 days, GES stock has gained 8.93%, climbing to a share price of $25.37. GES is trading towards the top of its 52-week range of $17.21-$26.20. It shows ongoing positive price momentum, trading above the 20-day (25.07) and 50-day (24.16) moving averages.
Despite the rising share price, the stock still trades in relative value territory. Its price-to-earnings ratio of 9.72x is at a discount compared to the Consumer Cyclical sector average of 18.27x and the Apparel Retail industry average of 27.36x. It is also significantly below the firm’s average P/E over the past five years of 26.85x.
Positive price and earnings momentum at a relative value is an attractive combination. Investors will be looking for additional evidence of growth in earnings per share when Q4 financial results are released. Further positive confirmation could be a catalyst driving the stock to higher levels (perhaps even squeezing those shorts).
What is the Price Target for Guess?
Analysts covering the stock have taken a cautious stance. Most recently, UBS analyst Mauricio Serna raised the price target from $25 to $26 while maintaining a Hold rating.
Overall, Wall Street is sidelined on GES, with a Hold consensus rating based on four analysts’ stock ratings in the past three months. The average GES price target of $26.50 represents an upside potential of 4.45% from current levels.
Closing Thoughts
Guess’s recent performance indicates a company on the upward leg of a multi-year turnaround project. The company has proven resilient in a volatile industry with shifting tastes and preferences. The strategic acquisition of the Rag & Bone brand further illustrates the company’s ambition and adaptability. With a stock price on an upward trajectory and trading at a relative discount compared to sector and industry averages, GES presents a compelling value proposition.
However, the high short interest is a note of caution. As Guess prepares to announce its Q4 and Fiscal 2024 results, investors will be on the lookout for indications of continued earnings growth. Positive Q4 results could potentially drive the stock to higher levels quickly.
