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Why Kontoor Brands Is Up 12% Today

By Rich Duprey – Jul 27, 2020 at 11:55AM

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Wall Street is suddenly very upbeat about the denim maker's outlook.

What happened

Shares of Kontoor Brands (KTB -2.41%) were soaring 12% higher at 11:47 a.m. EDT Monday following a Goldman Sachs analyst's flip from bear to bull on the stock, changing her rating from sell to buy.

So what

Analyst ratings are often merely little more than closing the barn door after the horse has galloped away. In this instance, however, Goldman Sachs analyst Alexandra Walvis seems to be getting out in front of the turnaround she sees forming at the denim maker, as Kontoor's stock has largely traded in the range it settled down in following the COVID-19 outbreak.

Stacks of denim jeans on store shelves

Image source: Getty Images.

Now what

Changes of heart by analysts don't change the operations of a business, though -- even if they've made a big U-turn like Walvis did. Kontoor Brands still needs to show it deserves the upbeat outlook, though the analyst thinks the Wrangler jeans owner can do that.

According to TheFly.com, Walvis wrote a note to clients saying that Kontoor has a "stronger-performing" wholesale partner network, expects new distribution coming online soon, and owns its own supply chain, putting it in position to outperform relative to its peers.

She also noted that Kontoor has more exposure to online channels and mass merchandisers like Walmart, which accounts for 34% of revenue, compared with peers like Levi Strauss, which derives 56% of its revenue from chain retailers and department stores.

Walvis raised her price target to $24 per share, 35% above the $17 range where it closed last week.

Rich Duprey has no position in any of the stocks mentioned. The Motley Fool recommends Kontoor Brands Inc. The Motley Fool has a disclosure policy.

Stocks Mentioned

Kontoor Brands Inc Stock Quote
Kontoor Brands Inc
KTB
$43.71 (-2.41%) $-1.08

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