With 2012 just beginning, now's a great time to gauge how the stocks you're interested in are likely to do this year and beyond. By knowing what stock analysts and fellow investors expect from a stock, you'll be smarter about whether you should buy it for your portfolio -- or sell it if you already own it.
Today, let's take a look at Coldwater Creek (NAS: CWTR) . As I discussed last month, Coldwater Creek shareholders suffered big losses in 2011, as huge drops in revenue and same-store sales putting the retailer out of Wall Street's graces. But will management's turnaround plan succeed in limiting the damage and getting the stock moving in the right direction again? Below, I'll take a closer look at what people expect from Coldwater Creek and its rivals.
Forecasts on Coldwater Creek
|Median Target Stock Price||$1.20|
|Fiscal 2012 EPS Estimate||($1.07)|
|Fiscal 2013 EPS Estimate||($0.53)|
|Expected Annual Earnings Growth, Next 5 Years||0%|
|Expected Revenue Growth, Fiscal 2013||1%|
Source: Yahoo! Finance.
Can Coldwater Creek solve its problems in 2012?
Analysts don't seem very bullish about Coldwater Creek. Their target price on the stock is only $0.28 higher than its current level -- and while that'd be a considerable percentage gain, it's a far cry from where the shares traded as recently as last May.
Fellow Fools Austin Smith and Sean Williams have already gone through the bearish case for Coldwater Creek. The company's losing money, has seen same-store sales drop sharply, and has been unable to match rival ANN (NYS: ANN) and its Ann Taylor line in controlling inventory and minimizing the need to discount its items.
But nearly the entire women's apparel industry has gone through some tough times lately. Talbots (NYS: TLB) has also seen steep sales declines and is now going through the added disruption of putting a new CEO in place. Chico's (NYS: CHS) has done a somewhat better job of avoiding the fate of Talbots and Coldwater Creek by staying more in tune with customers' fashion preference, thereby not having to discount unwanted merchandise quite as much.
The company gave investors more bad news yesterday, as it made further reductions to earnings guidance. But it at least seems that the rate of decline in sales has started to slow, and if CEO Dennis Pence is correct in his expectation that the company will cut overhead and inventory levels to produce gross margin improvement of 2 to 4 percentage points, then it would go a long way toward starting to dig Coldwater Creek out of its hole. Also, with cotton prices finally reversing gains from past years and falling sharply last year, the company may be in better position to cut costs and survive -- if it can make it through the next few quarters.
2012 will be a tough year for Coldwater Creek, and the stock is definitely a risky one at current penny-stock levels. But with everyone betting on the company to fail, the shares have a lot of upside if the company can somehow pull out a recovery. With a lot of help, Coldwater Creek could become a huge turnaround story.
Retail is a tough business, but one retailer has a lot going for it right now. Find out which one in the Motley Fool's special report: "The Motley Fool's Top Stock for 2012." The report is 100% free, so find out the name of this stock today while you still can.
Click here to add Coldwater Creek to My Watchlist, which can find all of our Foolish analysis on it and all your other stocks.
At the time this article was published Fool contributor Dan Caplinger doesn't own shares of the companies mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Fool has a disclosure policy.
Copyright © 1995 - 2012 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.