Morgan Stanley’s managing director, Kimberly Greenberger, discussed the firm’s view on the top retail names like Michael Kors Holdings Ltd (NYSE:KORS), Urban Outfitters, Inc. (NASDAQ:URBN) and J C Penney Company Inc (NYSE:JCP) on CNBC, exactly a year ago. We decided to go through the performances of these stocks an year after Greenberger gave her views on-air, to check how accurate Morgan Stanley’s views were.
The firm was correct with its ‘Overweight’ rating on Michael Kors Holdings Ltd (NYSE:KORS) with a price target of $74. Michael Kors Holdings Ltd (NYSE:KORS)’s shares reached the target in October 2013 and have continued to trade above that figure since then. However, Morgan Stanley had an ‘Underweight’ rating on J C Penney Company Inc (NYSE:JCP), with a target of $9, the stock used to trade at about $12.85 at that time. The stock reached its target of $9, pretty soon after the views were aired and continues to trade near that, even now.
“We have been ‘underweight’ on this stock for well over a year and our number one concern here is that this is a company that’s burning through cash at a very alarming pace. They finished the second quarter here with a billion five in cash, which means, they spent or used about $1.3 billion of cash within the quarter. That gives them a billion five, they have got a little bit of liquidity in their asset backed line of credit still remaining, but our cash flow forecast continues to suggest that J C Penney Company Inc (NYSE:JCP) runs out of cash in the next 4 to 5 quarters [...],” Greenberger said.
Greenberger was also bullish on Urban Outfitters, Inc. (NASDAQ:URBN), Morgan Stanley set an ’Overweight’ rating on the stock with a price target of $47. Sadly, Urban Outfitters, Inc. (NASDAQ:URBN)’s stock that was trading at nearly $41 sunk below $40 shortly after, and continues to trade below this level. Even though Greenberger was cautious on retail sales at the time, she was quite optimistic that Urban Outfitters, Inc. (NASDAQ:URBN) will stand out among other retailers in terms of performance. Urban Outfitters, Inc. (NASDAQ:URBN) had performed in line with Greenberger’s forecasts for a few months, but since then has not been performing well as was evident from its first quarter results in May 2014, when it declared an EPS of $0.26 versus $0.27, that most analysts on the Street were expecting.