After 22% Rally, Is Tapestry Stock Poised For Further Gains?

Tapestry’s (NYSE: TPR) stock, a luxury goods retailer of handbags, shoes, and accessories under the Coach, Kate Spade, and Stuart Weitzman has increased by almost 22% over the last month (twenty-one trading days) and currently stands at around $41. The market reacted upward to the company’s better-than-expected fiscal second-quarter results last month. The retailer saw sequential improvement in revenues from $1.17 billion in the fiscal first quarter to $1.68 billion in the recent Q2 quarter. In addition, the apparel retailer’s efforts to drive higher average selling prices and reduce promotional sales activity significantly improved profitability as well.  It should be noted that the broader S&P 500 returned close to a 1% decline over the last twenty-one days. While the company’s stock has declined 4% in the last five days, can it rebound from here or is it poised to fall further? We believe that the company’s stock is still undervalued at about 16x consensus fiscal 2021 (year ending June) earnings and that the stock could grow going forward. Specifically, there is a 52% chance of a rise in TPR’s stock over the next month based on our machine learning analysis of trends in the stock price over the last five years. See our analysis on TPR‘s Stock Chances of Rise for more details.

5D: TPR -3.9%, vs. S&P500 -1.2%; Underperformed market (16% likelihood event)

• Tapestry stock declined 3.9% over a five-day trading period ending 3/4/2021, compared to a broader market (S&P500) decline of 1.2%
• A change of -3.9% or more over five trading days is a 16% likelihood event, which has occurred 196 times out of 1256 in the last five years

10D: TPR 7.3%, vs. S&P500 -3.3%; Outperformed market (4% likelihood event)

• Tapestry stock rose 7.3% over the last ten trading days (two weeks), compared to a broader market (S&P500) decline of 3.3%
• A change of 7.3% or more over ten trading days is a 4% likelihood event, which has occurred 55 times out of 1240 in the last five years

21D: TPR 22%, vs. S&P500 -1.1%; Outperformed market (7% likelihood event)

• Tapestry stock rose 22% the last twenty-one trading days (one month), compared to a broader market (S&P500) decline of 1.1%
• A change of 22% or more over twenty-one trading days is a 7% likelihood event, which has occurred 92 times out of 1198 in the last five years

While TPR stock may be attractive, 2020 has created many pricing discontinuities which can offer trading opportunities. For example, you’ll be surprised how the stock valuation for TJX vs Abiomed shows a disconnect with their relative operational growth. You can find many such discontinuous pairs here.

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