Children's Place

The Children’s Place Could Rally Above 100

The Children’s Place Inc. (PLCE) is trading higher by more than 5% in Monday’s pre-market after two analyst upgrades. The children’s specialty apparel retailer reports Q1 2022 earnings in Thursday’s pre-market when it’s expected to post a loss of $0.21 per-share on $331.15 million in revenue. If met, the loss-per-share will be one-tenth of the red ink posted during the same quarter last year when retailers around the world closed their doors as a result of the pandemic.

Back-To-School Play

The company operates more than 1,000 locations in 21 countries as well as lucrative online e-commerce sites Childrensplace.com and Gymboree.com. U.S. operations are rapidly returning to normal but restrictions in other countries are keeping pressure on revenue. In addition, American school kids will return to physical classrooms this fall, underpinning back-to-school sales that have suffered badly due to remote learning.

Monness Crespi and Hardt analyst Jim Chartie upgraded The Children’s Place to ‘Buy’, noting “the reopening economy and government stimulus has driven strong consumer demand across all categories in March and April, with many retailers reporting sales above March/April 2019 levels. Given much better than expected consumer spending and conservative guidance, we are raising our 1Q EPS estimate more than $1 above consensus and see the potential for more upside”.

Wall Street and Technical Outlook

Wall Street coverage has shrunk from 8 to 5 top tier analysts since the start of 2021. Consensus now stands at an ‘Overweight’ rating based upon 2 ‘Buy’, 1 ‘Overweight’, 1 ‘Hold’, and 1 ‘Sell’ recommendation. Price targets currently range from a low of $74 to a Street-high $150 while the stock is set to open Monday’s session about $18 below the median $101 price target. There’s plenty of room for upside with this configuration if the company posts an upbeat quarter.

The Children’s Place hit an all-time high near 160 in the first quarter of 2018 and entered a persistent downtrend that bottomed out at 17- year low in single digits in March 2020. It bounced off that depressed level in two strong recovery waves, finally stalling at 200-week moving average resistance in January 2021. The stock is testing four-month range resistance in the pre-market, with a breakout favoring a rapid advance into triple digits.

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Disclosure: the author held no positions in aforementioned securities at the time of publication.