Wall Street Reacts To Fossil Group

Shares of Fossil Group Inc (NASDAQ: FOSL) fell more than 18 percent Wednesday following a disappointing Q4. Below are two analyst reactions to the news.

Barclays analyst Matthew McClintock commented that Fossil had been making long-term investments but that investors had been unable to see the payoff. For example, the company’s infrastructure investments were supposed to result in lower expenses. McClintock said, “This appears unlikely now, as 2015 guidance includes high-single-digit expense growth on a (3) percent to 1 percent revenue outlook.”

Discussing Fossil’s view of the wearables market, McClintock was “uncertain how Fossil's strong competitive advantages in mechanical watches will translate into the hardware technology industry,” however the analyst looked “forward to further insight on its role at the upcoming analyst day.”

Barclays maintained an Underweight rating and cut its price target from $95 to $80 due to the belief that the company “is in the midst of a significant secular disruption and will likely face further financial pressure before visibility materializes surrounding its long-term outlook.”

Analyst Randal J. Konik at Jefferies took a different perspective on the stock and maintained a Buy rating while cutting the price target from $150 to $130.

Konik had a favorable view the company’s “near-monopoly status” and believed “the company will continue to benefit from a growing brand portfolio and globalization” of its business.

Konik also saw an “opportunity to initiate LT positions in the stock today” due to the pull back in shares.

Looking ahead at the wearables market and the Apple Watch launch, Konik’s proprietary survey work suggested “the smartwatch threat is overstated given low demand for these devices among US consumers today.” The analyst was “confident” in Fossil’s “ability to leverage its design expertise and partnerships with Google and Intel to effectively compete in the wearable tech market and maintain its strong positioning in the watch market.”

Fossil Group recently traded at $81.18, down 18.26 percent.