Why Shares of bebe stores, Inc. Jumped

Is this meaningful or just another movement?

Jeremy Bowman
Jeremy Bowman
Apr 14, 2014 at 1:46PM
Consumer Goods

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of bebe stores, Inc. (NASDAQ:BEBE) were dazzling the market today, climbing as much 14% after getting an analyst upgrade. 

So what: Janney Capital lifted its rating on the women's clothing retailer from buy to neutral, citing an improved outlook over the next few years. The research firm said it expected to see "positive sustainable comps" over the next year as well as return to quarterly profitability, a return to positive free cash flow in FY 2015, and positive annual earnings in FY 2016. Janney also raised its price target on bebe from $5.50 to $7.50.

Now what: While the endorsement from the research firm is certainly welcome news for the struggling retailer, a 14% jump seems a little exaggerated for an analyst upgrade. In its client note, Janney was careful to refer to those improvements as "potential" returns to profitability. Analysts still see losses through 2015, and the women's fashion industry is always competitive. In its most recent quarter, comps declined 1.9%. If that figure doesn't get back into positive territory this year, don't expect to see a return to profitability anytime soon.