KORS - 100%+ profit in 6 months --> Time to take profits?Michael Kors (KORS) has had an impressive 6 months skyrocketing up in its price from just over $30 to $65+ now . That's (almost) more than a 100% increase in six months (depending on your entry price). Stating it as an annualised return is stupid but it's fun to just say that that would mean just under or over 200%.
In any case, the run up has been great. But what now?
If we look at the weekly graph, we see that KORS is racing its way to the 50% Fibonnacci retracement . It will test it soon and the question will then be: will it break through? In terms of fundamentals of the stock, it might be possible to break this resistance line - the company has held practically no debt in its entire history, is still growing abundantly (albeit a bit less in its base market US), its new men's fashion unit is paying off as well as its acquisition of Jimmy Choo, and the investment in the online channels has shown great results; although KORS still has to work its way back up in terms of brand appeal, which has been relatively strongly diluted in the past couple of years - but as for the moment I believe it is far too risky to aim for breaking resistance.
--> The technicals support this view: KORS is aiming for a test of the 50% Fibonnacci level, yet has both MACD (upcoming death cross) and RSI (way above 70) against it . These are very bearish signals that can have the stock pull right back to maybe even the 38,2% and by bearish extension the 23,6% one.
Moreover, illustratively , you can see w hat happened after the golden cross back in January 2016 : price jumped through the roof and successfully tested the 23,6% Fibonnacci (note that there, it did have MACD and RSI support!), subsequently it tested the 38,2% Fibo, failed, and plummeted back completely (and in the process made a clear H&S figure :-) )!
In any case, I do believe the longer term prospects of the company are quite bullish, but a correction in the stock price is to be expected. Therefore, I would (non-officially ;) )recommend to take some profits and get back in at a more depressed price if one likes this stock. (However - really investing in fashion stocks is something very difficult, as it has a very capricious customer base).
Great trade, but time for something new!
PS: I haven't done a detailed analysis in this piece, but to place the correct stop losses etc, definitely zoom in on the upper trend channel KORS is currently in to define these!
Fashion
ANF Entry - Significant Shifting at all time lowRecent events in the industry with sector support are spiking several stock in the retail fashion field, ANF is strategically placed in this time and buyers are showing their interest at all-time-low.
For me, there are enough signs to support the attempt to build a position in the stock.
*Already holding in the fashion sector at AEO which also spiked and moved nicely, linking the trade here.
KORS- More room to fallThe downward channel broke severely to the downside this week after KORS plummeted an additional 25% post-earnings. I think the multi-year lows of ~35/36 will be tested if not breached. Even if the stock is slightly oversold in the very near term, the trend on the technicals is pretty clear.
Fundos-
After a dismal earnings release and a 25% drop in the price of shares over the last week, I still think KORS may have more room to tumble. The low price to earnings ratio may lead some investors to believe KORS is a value, but I believe it may be a classic value trap.
Overall sales may be increasing but there are major caveats. Margins & comparable same store sales are down.
This is a reflection of luxury brand status deterioration. The ubiquity of KORS products is indicative of an over-saturated brand. The products are commonly owned by people in lower economic strata. In my view, this has caused KORS to enter the faux luxury category.
To increase incremental sales, KORS has offered deep discounts on their core luxury products (watches & purses). This negatively impacts the bottom line each quarter since margins take a hit. More importantly however, the long term growth prospects will wane if consumers begin to think KORS is no longer 'in', or if they no longer think of it as a luxury brand. Discounting a brand's flagship products is deleterious to the company's image and their long term profitability (see Coach, Abercrombie, countless others)
