After handily beating earnings on Tuesday and trading at new all-time highs, one top analyst thinks Michael Kors shares are worth a look from investors — and could be going higher.
"The valuation appears rich, but we expect to see estimates going higher following the conference call," said Corinna Freedman, analyst at Wedbush Securities. Freedman's firm has an "outperform" rating on the stock, with a $65 a share price target.
"It's difficult to recommend starting new positions (in Kors), but we most certainly would be holding on if we owned it already," she said.
Freedman added that her firm is concerned about the normalization of gross margins in the future for Kors. "As the brand gets more widespread and gains customer acceptance, we're concerned with the level of markdowns, but it isn't a problem currently," she said.
With strong growth, Kors is likely taking market share from the likes of Coach and Kate Spade. "We see a competitive spread across the landscape, as more and more apparel manufacturers are getting into the accessories business," she said.
Kors reported a sharply higher quarterly profit on Tuesday, fueled by a 71 percent gain in revenue. The strength was on higher revenue in the company's wholesale segment, including a jump of 41 percent in stores open at least a year.
Kors posted net income of $130 million, or 64 cents per share, in the third quarter, up from $32 million, or 20 cents per share, from a year earlier. Revenue jumped to $636.8 million, from $373.6 million.