Gildan Activewear downgraded ahead of Q2 earnings

Gildan Activewear Inc. president and CEO Glenn Chamandy.

Apparel company Gildan Activewear Inc. was downgraded on Wednesday from buy to hold by analysts at Desjardins Capital Markets.

The Montreal-based company has witnessed its stock rally a lot more than 30 percent this year, which led to the downgrade, as Desjardins says the stock has become fairly valued.

“We\’re revising our rating on Gildan to carry (from buy) according to our thought that the market happens to be ascribing a fair valuation to the shares,” said Chase Bethel, analyst at Desjardins. “Even as we make this revision, we expect Gildan to advance toward the attainment of its strategic objectives, which have both sales growth and cost-reduction elements.”

Bethel includes a 12-month price target of $45 for that company, making clothing such as t-shirts and fleeces which are on to be branded by screen printing companies.

Even using the rate cut, Bethel continues to be bullish on the company. He notes that there\’s more upside potential than downside risk with Gildan.

“The risk to our call is that Gildan, being a dynamic growth company, has numerous growth levers which the unveiling of future plans may raise the stock,” he said. “We still believe that Gildan has room to grow in its established markets in Printwear and Branded Apparel. We note that markets for example women\’s branded basics and the uniform market remain untapped.”

Bethel recommends that any investors not in the name wait for a share price decline to purchase the stock, noting that it has outperformed the broader TSX on the year-to-date, three-year and five-year basis.

The company’s shares last closed at $44.16. It\’ll report its second quarter earnings on July 31.