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Shares of Michael Kors Holdings (NYSE:KORS) fell as much as 10% in intraday trading Tuesday after being downgraded by Credit Suisse.
Why it's happening
Specifically, Credit Suisse analyst Christian Buss lowered his rating on Michael Kors stock to neutral from outperform, while simultaneously reducing his 12-month per-share price target to $79 from $103. Even so, and keeping in mind the broader market also plunged yet again today, Buss' new target also represents a roughly 20% premium from Michael Kors' current share price at below $66.
To explain his decision, Buss pointed to a "combination of rising inventories and softening traffic [which] has led to a dramatic step up in promotional activity" for the brand. To be sure, he also noted the percentage of Michael Kors merchandise on sale had risen to 31% in December from 5% in October, while around 65% of all handbags on Michael Kors' website were also offered at discounted prices last month. All told, the latter figure makes it the most "promotional" website of the six brands he researched.
Of course, the market reaction also isn't terribly surprising considering Michael Kors' most recent quarterly results had already spurred investors' fears of slowing growth. But with Michael Kors now trading near a fresh 52-week-low, this big pullback may yet prove to be a solid buying opportunity for patient, long-term investors.
Steve Symington has no position in any stocks mentioned. The Motley Fool recommends Michael Kors Holdings. The Motley Fool owns shares of Michael Kors Holdings. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.