Moas: Why I'm No Longer Buying Guess

• Standpoint ResearchFounder and Director of Research Ronnie Moas recently downgraded Guess?, Inc. (NYSE: GES) from Buy to Hold.
• The main reason behind the downgrade is Moas’ belief that the shares are fairly valued.
• Shares of Guess were up more than 2 percent on Tuesday.

Moas noted that shares of Guess have surged roughly 35 percent since the beginning of May, hitting a 52-week high on Tuesday. Trading at 22 times the 2016 earnings estimate – and 21 times the trailing 12-months earnings, the shares seem fairly valued.

Moas also pointed out that, while there is no revenue growth, the company does offer a 4 percent dividend yield -- and has 23 percent of its $2 billion market cap in cash with no debt. However, Moas explained he can no longer maintain a Buy rating on this name due to the recent absolute and relative (to the S&P) rise.

A Closer Look

Guess was Moas’ recommendation from August 2014. He is now exiting the name “with no absolute or relative gain/loss.” He highlights that the current situation is worse than what it was at the time he made the original recommendation a year ago, so exiting at break-even seems reasonable.

Moas concluded, since two other research firms boosted their price targets for Guess on Tuesday morning, driving shares up, he would sell into this strength.

Disclosure: Javier Hasse holds no positions in any of the securities mentioned above.