Why Canada Goose stock is cheap today



warning or alert

Written by Ambrose O’Callaghan at The Motley Fool Canada

Canada Goose (TSX: GOOS) (NYSE: GOOS) is a leading brand that designs, manufactures and sells luxury winter clothing. Its shares were down 4% as of the late morning of December 20. Canada Goose stock plunged 28% month over month.

I am looking to recover Canada Goose shares from their recent decline. Today I want to talk about why the best brand of winter clothing is on my radar before the holidays. Let’s go.

Controversy in China Won’t Derail Company’s Promising Regional Advances

Tensions between Canada and China succeeded in pushing this prominent title down from historic highs at the end of 2018. At the time, investors feared that Canada’s arrest of Huawei executive Meng Wanzhou would jeopardize the company’s progress on the Chinese mainland. However, his store opening in Beijing turned out to be a very solid success.

Earlier this month, Canada Goose came under fire over a dispute over its return-to-China policies. A city consumer watchdog accused the company of “bullying” its customers. It comes several months after the company was fined for false advertising. Chinese regulators have launched a campaign to aggressively protect consumer rights.

This Canada Goose slippage should not discourage investors. Its direct revenue to consumers in mainland China increased 85.9% year-on-year.

Why Canada Goose looks strong this holiday season

I had suggested that Canadians should look to get hold of this stock earlier in December. Canadians were predicted to spend big during the holiday shopping season in 2021. Canada Goose has always been a favorite target before winter.

The company released its second quarter fiscal 2022 results on November 5. Total revenue reached $ 232 million, up from $ 194 million the previous year. Meanwhile, gross profit jumped to $ 135 million on a gross margin of 58%, from $ 94.2 million, or 48.4% in the second quarter of fiscal 2021.

Its good quarter prompted Canada Goose to increase its outlook for fiscal 2022. However, this was based on some key assumptions that may already be in jeopardy. He did not foresee any material changes in economic conditions or disruption to operations due to COVID-19. Fortunately, the company has maintained a very strong e-commerce platform, which has allowed it to compete in a very difficult environment.

Here’s why Canada Goose is a strong buy right now

Canada Goose still has high growth potential over the long term. Luxury clothing has managed to escape the worst of the so-called retail apocalypse of the past decade. Companies that have established strong digital commerce channels have grown even stronger in this challenging environment.

The company’s earnings are expected to show very solid growth in the coming years. Stocks in this stock last had an RSI of 32. That puts Canada Goose just outside technically oversold territory at the time of writing. I am looking to take hold of this exciting brand of luxury clothing as the holiday season begins.

The BUYER ALERT: Why Canada Goose Stock is Cheap Today post first appeared on The Motley Fool Canada.

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Foolish contributor Ambrose O’Callaghan has no position in the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned.




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