J.P. Morgan added to Bebe Stores (BEBE) to its Focus List, and has a $35 target.
Analyst Brian Tunick says he recommends that investors take advantage of recent price weakness. He says investors who think they missed an initial turn in business should be buying the stock on this pull-back. He feels sales and earnings momentum will only accelerate in upcoming months.
As the company fills senior management spots, investors will begin to gain comfort that earnings power for Bebe could be in the $1.50 to $1.70 range. He thinks these steps will award Bebe a premium multiple of 25, based on his $1.27 calendar 2005 earnings per share estimate. He says the $7 in cash per share adds further support to the $35 six-month target.