Signet Analysts Stay Cautious as Beaten-Up Stock Gains a 2nd Day

(Bloomberg) -- Signet Jewelers Ltd. shares rose for a second session following its fourth-quarter financial report, which featured a tax-driven earnings beat and a fiscal-year forecast that Nomura Instinet’s Simeon Siegel called “better than feared.”

With Signet still down by about 11 percent year-to-date, analysts have remained cautious in their commentary. The stock lacks a single buy rating in data compiled by Bloomberg, while nine analysts rate Signet a hold, and one has a sell rating. Short interest stands at 14 percent of float, with 4.1 days to cover, according to S3 Partners.

Signet rose as much as 4.2 percent, following Wednesday’s gain of 0.5 percent. Shares have fallen 60 percent from their 12-month intraday high of $71.07 after a series of bumps. Those include reports that may be expanding jewelry sales and that De Beers was said to have slashed diamond prices, a negative comment by Gracian’s Matthew Kliber at the Whitney Tilson short conference, and a weak forecast issued in December, which was then slashed in January.

Here’s what Wall Street analysts had to say after Signet’s earnings:

Nomura Instinet, Simeon Siegel

  • “Shares may see support in the near term given a low 1Q guide and a 4Q-heavy business model.”
  • Siegel downgraded the stock back in July on the premise of “internal hurdles & external promo challenges”; now, with further commentary around the challenging environment and continued promotional pressures, “the onus remains on SIG to execute”
  • Questions the company’s intentions with its Jared banner, pointing out that Jared saw a “meaningful net decline” of 14 stores in 4Q vs the usual 1-2 store opening/closures
  • Rates neutral, price target to $28 from $26

Telsey Advisory, Dana Telsey

  • “While the headline EPS beat the moderated outlook, we see the quarter’s underlying operational performance as relatively in line with market expectations”
  • Fiscal 2020 EPS outlook “brackets the consensus,” but the comparable sales outlook is “somewhat disappointing”
  • “In year two of the company’s turnaround strategy, comps and earnings remain on a negative growth path” while inventory appears “somewhat elevated”; jewelry category remains promotional and competitive
  • Annual visibility remains more challenging until next holiday season approaches
  • Rates market perform, price target $28

What Bloomberg Intelligence Says:

Signet has yet to see any shine from its Path to Brilliance plan, as rampant competition scuffs efforts to return to profitable growth. The U.K. will remain a headwind, likely until there is a Brexit resolution, while premium banner Jared and once-hopeful savior James Allen fail to lift sales.

--Seema Shah

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Cowen, Oliver Chen

  • “SIG’s turnaround is contingent upon its ability to create a seamless shopping experience for consumers by leveraging its physical stores and integrating data analytics to inform product innovation”
  • This will be a “a multiyear process, and SIG is still in the early stages of transformation’; comparable sales and overall performance “could get worse before improving”
  • Market perform may be at risk if changes necessary are more drastic than expected; Chen believes SIG needs to reimagine the customer experience, focus on the speed and sequencing of product innovation; price target $30

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