Shares of American Apparel Inc. tumbled to an all-time low Monday after an article in The Wall Street Journal focused on the clothing retailer's growing pains, but one analyst said the article fails to take into account its growing cachet.
On Saturday, the Journal published a profile of American Apparel's founder, Dov Charney. The article said American Apparel is suffering from some "material weaknesses" in accounting practices, sexual harassment suits and high debt levels.
Shares fell 82 cents, or 9.9 percent, to close at $7.48 after falling to a new low of $6.90. But Lazard Capital Markets analyst Todd Slater said the article missed some positives about the company.
"While the article speculated about accounting challenges that occurred years ago, not uncommon in young growth companies, American Apparel's historical results have been scrutinized and approved by independent auditors as well as by the SEC," Slater wrote in a note to investors on Monday.
Also, the company is putting steps in place to correct its accounting issues, including using a financial consultant and adding other staff.
Slater said that the stock is cheap and will recover as the company grows.
"Despite industry-leading fundamentals, the stock trades at a significant discount to its growth rate," Slater wrote. "We believe the stock will recover as it adds incremental executive talent, shores up its accounting weaknesses, improves its ability to provide Street guidance, and hits on its external benchmarks."
In addition, the company has "rising urban hipster appeal," Slater said.
He reiterated his "Buy" rating on the stock and $17 price target.
Terms & Conditions
RSS Headlines
Fool UK