Fossil In For Fight With Apple After Big Quarterly Win, Analyst Says

Wristwear company Fossil Group Inc (NASDAQ: FOSL) proved to be a diamond-studded timepiece after reporting fourth-quarter earnings after close Tuesday with great news for investors.

However, analysts wonder if the company's sheen will tarnish coming out of a successful holiday. The company reported a major earnings beat with fourth-quarter EPS of $1.46 versus consensus of $1.32. Sales clocked above expectations at $933 million over estimates of $927.1 million.

Investors were ecstatic with the news, and pushed the stock up nearly 30 percent by the end of trading Wednesday. Fossil shares closed at $44.30 on Wednesday.

Investor reaction might be premature, however.

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'Is 1Q Guidance Low Enough?'

Oppenheimer analyst Anna Andreeva was much less optimistic about Fossil than the market. She rated the company Perform and did not offer a price target. While she began her remarks by noting that management had proven it could "alleviate concerns" about a potentially "broken model," she wondered if a surprising holiday might get investors' hopes up for first-quarter guidance. She titled a section of her note "Is 1Q guidance low enough?"

Andreeva noted two major concerns that could prevent future earnings growth: smartwatch competition and a slowing North American market. "Concerns about North America slowdown and potentially negative impact from AAPL smartwatch are near-term headwinds on FOSL that likely don't get resolved in the near term," she concluded.

Nomura Also Pessimistic

Nomura analyst Simeon Siegel maintained a Neutral rating and $37 price target for the watch company. Siegel expected management's guidance to prove conservative, but sees challenges as watchmakers see if the mass market dons wearable technology.

"We believe the remainder of the year hinges on hopes for improved customer reception to product (mainly wearables), absent which we expect returning to EPS growth may prove elusive," Siegel wrote.

Fossil reports first-quarter earnings in May.

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