Michaels Companies (NASDAQ:MIK) is the largest Arts & Crafts retail chain in North America, it also owns several brands that enable it to offer arts, crafts, framing, floral, home décor and seasonal merchandise to decorators.
MIK has made an impressive recovery during the last 3 months off a 18 March closing low at 1.00/share.
This stock offers the best Northside potential at current prices of essential retailers in this market.
We are not alone JPMorgan’s US Equity Analyst Focus List has MIK as a value idea “based on an expected re-rating to PE on 2021 EPS due to the path to positive comps over the next 4 Quarters, new management, and improving margin performance into 2021.”
Looking at its valuation, MIK trades at 5.82X P/E because investors are fixated on its low growth rate.
MS’ 5-Star sector analyst explained, “MIK is inexpensive relative to history… While valuation has collapsed since comps turned negative in 2018 (averaging 6.0x PE since), it traded at an average of 13x in the 2014-17 period when comps were better. This is in comparison to quality/’growth’ retail stocks (and the market), which have broadly been trading in-line to above recent historical averages (HD at 23x P/E on 2021E Vs FY1 average of 21x, WMT at 22x vs. 21x, and COST at 33x vs. 31x).”
He noted, “Moreover, as discussed below, we believe new CEO Ashley Buchanan can turn the tide of share losses. Then, we get the lapping of closed stores in 1-H of Y 2021.”
And we believe MIK’s leading position in an enthusiast-based category as well as investments in e-Commerce, price perception and innovation should help reverse share loss. And Y 2020 could see pressure on margins fade, with strong expansion slated for Y 2021.
Based on out Key indicators, I am Bullish across the board and rating MIK buy with a price target at 20 in Q-4 2021
The broad analyst community is cautious with 1 Buy, 2 Holds and 2 Sells add up to a Hold consensus rating at 4.96.
Have a healthy day, Keep the Faith!