Hanesbrands (HBI) Chairman of the Board Ronald Nelson bought 50,000 shares of the apparel company at $12.73 on Nov. 9. The long-time Hanesbrands insider disclosed in a Nov. 10 Form 4 buying $636,600 of HBI.
It was Nelson’s largest insider purchase of HBI since he became a director in 2008. The buying came after HBI disappointed investors with weak guidance following its Q3 earnings report. Nelson was named Chairman of the Board in April of 2019.
Hanesbrands closed at $12.92 on Thursday, down 21% over the last five days.
Nelson’s buying follows a bullish assessment of HBI’s prospects by Evercore ISI analyst Omar Saad on Nov. 7.
Saad cut his 2020 EPS estimate to $1.35 from $1.40 However, he maintained an estimate of $1.55 for 2021 and $1.80 for 2022. Despite the soft guidance, Evercore also maintained its price target of $20. That implies 54% upside from today’s close. According to Saad, that valuation indicates low investor expectations relative to the cash flows he expects the company to generate over the next five years.
Evercore ISI sees Hanesbrands has having a strong “moat” along with 54% upside.
Hanesbrands had a big Q2, with the stock surging to one year highs of $17.74 on October 23. That was a 155% rally from an April 3 low of $6.96.
HBI had appreciated significantly since its Q2 report, when the company surprised the street by reporting mask sales of $750M. And while masks look strong going forward, Evercore noted that new CEO Steve Bratspies “turned down the dial” on the long-term PPE opportunity, suggesting Hanesbrands would focus more on its core businesses.
Investors typically view Hanesbrands as an apparel commodity business, according to Evercore. But the firm believes HBI’s “tried-and-true” brands, combined with low-cost manufacturing, gives the company a sizable moat in the apparel industry. A significant purchase by Hanesbrands insider Ronald Nelson suggests smart money agrees with this analysis.
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