Analyst ups Pacific Sunwear rating, price target

Associated Press

NEW YORK (AP) -- Pacific Sunwear's stock climbed to its highest point in two years on Thursday as a Wedbush analyst boosted her rating and price target for the surf-and-skate-inspired retailer, citing signs of a sustainable turnaround.

THE SPARK: Analyst Betty Chen lifted Pacific Sunwear of California Inc.'s rating to "Neutral" from "Underperform" and increased its price target to $3.75 from $2.

On Wednesday the Anaheim, Calif., company reported fiscal first-quarter revenue of $169.8 million. This topped the $166.5 million that analysts surveyed by FactSet expected. Pacific Sunwear also posted a smaller adjusted loss than a year ago, and gave a solid forecast for the second quarter.

The company expects adjusted per-share results for the second quarter between a profit of 2 cents per share and a loss of 5 cents per share. Analysts predict a loss of 5 cents per share. The company anticipates revenue between $209 million and $219 million for the period. Wall Street forecasts $198.6 million in revenue.

THE ANALYSIS: Chen said in a client note that Pacific Sunwear's merchandise margin is improving on better sales of full-priced items, while the women's category looks for continued growth through the success of exclusive brands like Kendall & Kylie and Brandy Melville and products that are on trend.

A representative for Pacific Sunwear did not immediately respond to an email seeking comment.

SHARE ACTION: Shares of Pacific Sunwear gained 35 cents, or 12 percent, to $3.27 in midday trading after rising as high as $3.45 earlier in the session, its highest level since May 2011. The stock is up 83.6 percent for the year to date.