Why Fossil Shares Might Keep Flying

While Fools should generally take the opinion of Wall Street with a grain of salt, it's not a bad idea to take a look at particularly stock-shaking analyst upgrades and downgrades -- just in case their reasoning behind the call makes sense.

What: Shares of Fossil Group (NASDAQ: FOSL  ) climbed 2.5% today after Piper Jaffray upgraded the consumer fashion company from neutral to overweight.

So what: Along with the upgrade, analyst Erinn Murphy boosted her price target to $147 (from $121), representing about 18% worth of upside to yesterday's close. While value investors might be turned off by Fossil's hot run over the past year, Murphy believes that there's more room to run given her expectation of accelerating top-line growth and expanding margins.

Now what: Piper Jaffray thinks that Fossil's operating margins could exceed 20% over time, and that its price multiples could expand as a result. "[S]ales catalysts are accelerating, and margins are at a positive inflection point," wrote Piper. "We believe FOSL is benefiting from a solid watch cycle, an evolving portfolio of global lifestyle brands (several rank well in our Teen Survey), macro-economic recovery in Europe (28% of sales) and expanding global distribution, in particular in Asia." With Fossil shares up 60% from its 52-week lows, and trading at a 15-plus price-to-cash flow multiple, however, I'd wait for some of the excitement to fade before buying into those tailwinds. 

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