Capri Holdings Limited (NYSE:CPRI) has seen an increase in hedge fund sentiment during the third quarter as the number of bullish hedge fund positions jumped to 36 from 28 at the end of June (see the 30 most popular stocks among hedge funds). So we decided to take a closer look at the stock. Wincrest Capital CEO Barbara Ann Bernard seems to share the same sentiments judging by a bullish pitch she presented during a CNBC interview. The pitch highlights the potential value that the company can provide to investors in the next few months.
Capri Holdings is an international holdings company that is one of the major players in the fashion industry. The company owns major global brands such as Michael Kors, Jimmy Choo, and Versace. These brands have outlets in major markets across the globe and are heavily present in markets such as China and the U.S. However, 2020 has been a challenging year and some markets have not been performing well. Capri plans to make some changes in an attempt to boost brand performance and generate more value for shareholders.
The Wincrest CEO believes that Capri Holdings’ stock price has a lot of growth potential. However, the brands have been experiencing a decline in their main market in the U.S., thus the profits have been on the decline. The stock has thus not been performing to its full potential because investors have been shying off from it. Capri shares currently trade at $42.15.
Barbara Ann Bernard is convinced that Capri has a lot of upside potential for numerous reasons. Capri’s traffic data on its website increased by 38% in October for the Michael Kors brand and similar traffic was observed for Versace. The company’s strategy for maintaining its bullish momentum involves doubling down on markets such as China which have high growth potential. The company believes that the Versace and Jimmy Choo brand which it recently acquired, have untapped potential in China. The strategy also involves closing some of the underperforming stores in the U.S.
Capri plans to increase the store count in China from 200 to 300. The numbers indicate just how much growth the company has obtained from China. To put it in perspective, China only contributed about 20% of Capri’s luxury sales while in 2025 it is expected to contribute 50% which is why Wincrest investors are convinced that the company will strategically benefit from China.
Capri is setting itself up to leverage better margins through digitization, allowing them to lower their SKUs by 40% while prices grow by 10 to 15%. Investors have been looking at these factors to formulate their rating on the stock. The Wincrest CEO also noted that the price at which they are buying the stock is appealing, which means that they believe the stock is fairly priced at the moment.