To start, on July 11 Goldman Sachs' Kate McShane initiated coverage on Michaels with a "neutral" rating and $8-per-share price target, representing a modest 3% discount to its trading levels at the time. To justify her position, McShane argued the stock would likely remain under pressure given the potential impact of tariffs as well as today's increasingly promotional, competitive retail environment.
That's not to say it was all bad news; the following day, Loop Capital analyst Laura Champine reaffirmed her own "buy" rating a $15 price target, adding Michaels appeared to be making progress on recent merchandising initiatives, should be poised to name a permanent CEO soon (following the departure of Chuck Rubin from the post earlier this year), and boasted an "attractive" valuation assuming the business stabilizes by the end of this fiscal year.
However, shares resumed falling the next week when Bank of America/Merrill Lynch analyst Elizabeth Suzuki lowered her rating to "underperform" from "neutral," nearly slashing her price target in half to $5 (from $9). Incidentally, Suzuki echoed McShane's concerns over competition, saying Michael's profitability could suffer as it loses market share to its peers.
Barring a preliminary update from the company in the next few weeks, investors will need to wait until Michael's reports quarterly results in early September to determine whether these concerns were merited. But given the discouraging notes of caution from Wall Street in the meantime, it was no surprise to see the stock falling last month.