Southwest Keeps Strong Buy on Michaels Stores

Analyst Ozarslan Tangun sees a buying opportunity for the retailer after a recent share sell-off

Southwest Securities keeps the strong buy rating on Michaels Stores (MIK ).

Analyst Ozarslan Tangun says he believes Michaels may have pulled more sales into March from April than expected with the earlier Easter. He says the company's guidance was 1% to 3% comps for March and April, while it reported a 7% comp rise for March.

Tangun notes management said earlier that Easter, coupled with less advertising for the month, negatively impacted comp sales. While April comps missed guidance and his estimate, it was the most difficult monthly comp Michaels will face in fiscal 2005 (Jan.).

He notes the next six monthly comps are easy at just 1% or 2%. He keeps the $3.00 fiscal 2005 (Jan) estimate, and the $3.53 fiscal 2006 estimate. He also keeps the $71 target.