) to overweight from neutral.
Analyst Brian Tunick says as much of the production and inventory issues are behind the company, he believes Bebe is on the cusp of an inflection point and earnings growth will show a sharp acceleration over the next 12 months. After four consecutive months of positive comparable store sales, he believes that very easy comparison sales and a more normalized inventory flow will contribute to an acceleration of comparisons.
Tunick says backing out the company's $5.50 cash per share, the shares are trading at a discount to group multiple of 20.5 times. Given the likelihood of comparisons and margin acceleration, he believes multiple expansion is justifiable.