UBS voiced cautiousness on Boot Barn Holdings ( NYSE: BOOT ) ahead of its earnings release on Wednesday.
In an “Evidence Lab” report, the bank’s analyst Jay Sole suggested that management may have trouble pleasing a fickle market on earnings day.
“Our conversations with investors suggest many believe the market is already pricing in a recession,” he told clients. “Thus, some may be willing to buy stocks at this point, but we think a key holdup is investors' unwillingness to buy stocks likely to experience downward EPS revisions over the coming months.”
As such, he suspected that a strong earnings report with optimistic guidance may be a double -edged sword.
“If the company gives a strong outlook, the stock likely moves very little since investors will likely think the outlook is too bullish,” Sole explained. “However, if BOOT were to beat Q1 handily, give a solid 2QTD outlook, but then give a well-below consensus 2H23 outlook because of macro factors, then we think the stock could actually go up.”
The hang-up at hand for Sole is that the latter scenario is extremely unlikely, in his view. As such, he assigned a "Neutral" rating to the stock alongside an $80 price target.
“BOOT will probably deliver a roughly in-line 1Q23 result and provide positive 2QTD commentary indicating the sell-side's 2Q forecast doesn't need to change,” he surmised. “We don't expect this will drive a sentiment shift given our conversations with investors suggest the market is also anticipating a solid 1Q and good 2QTD commentary.”
Boot Barn ( BOOT ) shares slid 2.4% shortly after Monday’s market open.
Options markets are anticipating an outsized reaction to the earnings release. According to UBS data, a 10.5% move is forecast after the report. Read more on the expectations for the retailer ahead of its report on Wednesday .
For further details see:
Boot Barn risk/reward is balanced ahead of earnings - UBS