Carter’s, Inc.

 

CRI Details
 
CRI Prises Senior Notes: Carter’s, Inc. (NASDAQ: CRI) is one of the top branded vendors in North America for apparel, solely for babies and adolescent children. Recently, the company stated that The William Carter Company, a wholly-owned subsidiary of CRI, has priced an offering of $500,000,000 aggregate principal amount of senior notes, due 2025. The notes carry an interest rate of 5.500% and depict a rise of $100,000,000 in an aggregate principal amount from the originally proposed offering size. The company plans to utilize the net proceeds from this offering to repay ~$250 million of borrowings under its revolving credit facility along with general corporate purposes.
 
CRI’s Measures on COVID-19 Outbreak: Recently, the company stated that it has taken necessary actions to cope up with the COVID-19 virus. In doing so, the company has opted to keep stores in North America closed until the situation stabilizes. These measures will aid the company to protect the health and well-being of its employees and customers. Due to continued store closures, the company has put all store employees on leave from April 3, 2020.  
 
Q1FY20 Financial Highlights for the Period Ended 28 March 2020: During the quarter, the company reported an adjusted loss of 81 cents per share, as compared to earnings of 87 cents reported in the year-ago period. Net sales during the period came in at $654.5 million, down ~11.7% year over year. Results were primarily impacted by store closures in North America, reduced wholesale sales and higher inventory due to the COVID-19 outbreak. In 1QFY20, gross profit came in at $228.3 million, down 27.7% year over year.
 

Q1FY20 Key Highlights (Source: Company Reports)
 
What to Expect: The company expects over $1 billion of its brands to be sold online in 2020. Further, it is working towards executing ship-from-store options in all stores and is focused on maximising liquidity in the shortest amount of time.
 
Risk Analysis: On the flip side, the company is exposed to tariff risks and adverse currency rates risks. The negative movements in foreign currency might impact its financial performance. Furthermore, the company is battling with higher inventory levels, bad debt provisions for COVID-19, and incremental costs.
 
Valuation Methodology: EV/Sales Multiple Based Relative Valuation (Illustrative)

EV/Sales Multiple Based Relative Valuation (Source: Refinitiv, Thomson Reuters)
 
Note: All forecasted figures and peers have been taken from Thomson Reuters, NTM-Next Twelve Months
 
Stock Recommendation: The stock of CRI closed at $76.64 with a market capitalization of ~$3.34 billion as on 26 June 2020. The stock is trading at the lower band of its 52-week trading range of $60.17 to $112.45. The stock has corrected by 10.59% in the last one month. The stock has a current yield of 2.97%. We have valued the stock using an EV/Sales multiple based illustrative relative valuation method and arrived at a target price with lower double-digit upside (in % terms). We have considered peers like American Eagle Outfitters Inc (NYSE: AEO), PVH Corp (NYSE: PVH), and HanesBrands Inc (NYSE: HBI), to name few.Considering the aforesaid facts, current trading levels and future growth prospects,we give a ‘Buy’ recommendation on the stock at the closing price of $76.64, down 3.09% as on 26 June 2020.

 
CRI Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

  Salesforce.com Inc

 

CRM Details 
 
CRM Inks Several Deals: Salesforce.com Inc (NASDAQ: CRM) is a worldwide leader in CRM (customer relationship management) technology that facilitates companies to enhance their relationships and interaction with customers. Recently, the company unveiled Salesforce Anywhere, which bridges the gap between new technologies and platform services to aid organizations unravel enhanced productivity and customer success for this new normal environment. In another update, the company announced a strategic deal with Siemens to develop a new workplace technology suite that will aid worldwide businesses to safely reopen and provide the future capability for physical workplaces. The company also informed the market about its expanded relationship with Pentagon Federal Credit Union (PenFed), to transform its member platform and enhance remote financial services amid the coronavirus pandemic.
 
Q1FY21 Key Highlights: During the quarter, the company reported revenues of $4.87 billion, up 30% year over. On a constant currency basis, revenue soared 31% year over year. The company also stated that the Tableau acquisition added $273 million to its first-quarter revenues. During the quarter, subscription and support revenues stood at $4.58 billion, up 31% year-over-year. Professional services and other revenues soared 20% year-over-year. Non-GAAP gross margin came in at 78.6%, up 30 basis points year over year. Non-GAAP EPS for the quarter stood at 70 cents. The company exited the period with cash and marketable securities worth $9.8 billion. Operating cash inflow for the quarter stood at $1.86 billion.
 

Financial Summary (Source: Company Reports)
 
Outlook FY21: The company updated its FY21 revenue guidance to be around $20 billion, up 17% year over year, to incorporate the impact of COVID-19. Non-GAAP earnings per share are now expected between $2.93 and $2.95, down from the previous range of $3.16 and $3.18.
 
Key Risks: The company expects coronavirus to keep impacting its business in the near term. Further, salesforce’s results are expected to be battered by a decline in software spending due to the coronavirus outbreak. Further, stiff competition from Oracle and Microsoft along with forex headwinds remains a concern.
 
Valuation Methodology: EV/Sales Multiple Based Relative Valuation (Illustrative)

EV/Sales Multiple Based Relative Valuation (Source: Refinitiv, Thomson Reuters)
 
Note: All forecasted figures and peers have been taken from Thomson Reuters, NTM-Next Twelve Months
 
Stock Recommendation: The stock of CRM closed at $183.17 with a market capitalization of ~$165 billion as on 26 June 2020. The stock made a 52-week low and high of $115.29 and $195.72, respectively, and is currently trading at the upper band of the range. The stock gave positive returns of 3.77% and 18.38% in the last one month and three-months, respectively. Considering the aforesaid facts, we have valued the stock using an EV/Sales multiple based illustrative relative valuation method. For the purpose, we have taken peers like Oracle Corp (NYSE: ORCL), ServiceNow, Inc (NYSE: NOW), Microsoft Corp (NASDAQ: MSFT), to name few and arrived at a target price with high single-digit upside (in % terms). Hence, we give a ‘Hold’ recommendation on the stock at the closing price of $183.17, down 2.75% as on 26 June 2020.
 
 
CRM Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

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