Buy Tapestry (NYSE: TPR) Bagging New High-End Customers
Buy Tapestry (NYSE: TPR)
Target: $68
Buy Up To: $50
Options Trade: Buy to open the November 16, 2018 call on Tapestry (NYSE: TPR) with a strike price of $50 at $1.20 or lower. Symbol (TPR181116C50)
Rationale:
Tapestry is the company formerly known as Coach. It is a brand powerhouse that got clipped on last quarter’s earnings due to weakness at its Stuart Weitzman division. This is a small division and I expect strength in its larger divisions to outweigh any continued softness in this brand.
Tapestry bought Kate Spade last July for $2.3 billion. For the past eight months, it has been improving the health of that business by pulling back on discounting. I expect earnings to be higher than expected next year as Kate Spade begins to grow again.
In the meantime, the basic Coach business is in the second inning of its own turnaround. The launch of its higher-priced Signature brand last fall is taking root. Coach, which represents over 70% of sales, is seeing accelerating sales.
It’s a rare situation to buy a branded company at such a low multiple. Investors, rightly so, still gravitate towards brand-name companies and I don’t expect Tapestry to be at this level for long.
My target is based on a P/E (price to earnings) multiple of 24 on 2019 estimates (the company’s year-end is June so fiscal 2019 is the next year out).
The next announced event for the company will be its year-end earnings in mid-August.
It’s possible the company presents at some retail conferences before then which could reignite the stock.
Stock Talk
Toro
Kate Spade has just died. Linda do you wish to re-evaluate this trade?
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Sydnee & Howard
Same question
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Michael B
Will the fact that Kate Spade is dead affect the stock. If she was no longer associated with Tapestry before her death which is my assumption then it shouldn’t have any affect on the stock. Correct?
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Rick
She has not been involved with the company for over ten years. She had started a new firm, Frances Valentine, 2 years ago. So, her tragic death should have little to no impact but I am going to wait a bit to make sure
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Linda McDonough
Hello all,
Kate Spade has not been involved with the company since 2007, well before Tapestry acquired it. It is an odd coincidence that her sad death was announced today. I actually had not seen that news before you pointed it out.
Best,
Linda
Steve S.
I suspect the question on potential investors’ minds is whether Tapestry’s Kate Spade brand–regardless of her recent non-involvement with it–will suffer because of her sudden and untimely death. Difficult to predict.
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Asjad Shamim
Did the order fill for anyone today?
ETKTRIDE
Haven’t see any fills today… midpoint has been hovering between $1.30 and $1.60 all day – perhaps tomorrow it will drop enough to get filled.
Linda, at what point do we increase the fill price and do you have a maximum price that it doesn’t make sense to fill above
Thanks
Michael
Linda McDonough
Michael,
Generally, I do not suggest chasing options prices. It is very difficult to pinpoint a great price limit so many subscribers trade outside of my recommended prices. That said, there is no near-term event on TPR so you might have luck being patient on the price.
Best,
Linda
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JoeJB
Filled 181116C50 option at 1.20 at 12:33 today
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Howard
Filled at $44.60 June 5
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Phil L.
I had several day orders placed at 10:30 for 1.20 across several accounts with Fidelity and IABC and none were filled.
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Victor
filled @ 1.20 on TASTY
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Steve Aarnio
A few lucky ones where filled at $1.20, the rest of us got left out in the cold. Should we stick it out with GTC orders at $1.20, or make an adjustment?
Linda McDonough
Steve,
Generally, I do not suggest chasing options prices. It is very difficult to pinpoint a great price limit so many subscribers trade outside of my recommended prices. That said, there is no near-term event on TPR so you might have luck being patient on the price.
Best,
Linda
Steve Aarnio
Ok, thanks, Linda. I’ll sit on this one a bit longer. And, thank you for this service! I’ve only been a member for a couple of months and I’ve already made enough profits on the individual trades (stupid TGT, LOL!) to cover the initial subscription fee plus.
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Michael B
Linda What do you feel about selling Puts on this stock or any stock when one can’t get the Call option price. The reason I say that is when I couldn’t get the Call in at 1.20 the day recommended I opted to sell a June 15th Put strike price of $43.
Linda McDonough
Michael,
The options that I recommend are straightforward buys of puts and calls. Selling puts or calls can work nicely but I don’t like the unlimited risk. Each subscriber has their own preference for risk tolerance though, so it can be a profitable path via a different route.
Best,
Linda
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Ray
Tapestry Is having a good day today.
Linda, are you having thoughts of taking profits here, or is there still lots of room to run?
Linda McDonough
Great minds think alike Ray.
Did you see my sell alert for the November call options this morning? I still think the stock can run quite a bit so am not issuing a sell alert on the stock. My target is $68.
Best,
Linda
Ray
Thank you.
I hadn’t seen your alert.
Great trade.
Phil L.
Ray,
Thank you. I missed it to till I saw your post
Phil
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