Will Canada Goose (TSX:GOOS) Fly Back to a High in 2019?

Canada Goose Holdings Inc. (TSX:GOOS)(NYSE:GOOS) may double by year-end. Here’s why it’s a TFSA top pick!

| More on:
little girl in pilot costume playing and dreaming of flying over the sky

Image source: Getty Images

What a disappointing year it’s been for Canada Goose (TSX:GOOS)(NYSE:GOOS), which clocked in a quarter that sent shares plunging over 30%. Not only do Goose investors need to worry about the situation brewing in China, a major source of forward-looking long-term growth for the company, but the demand for its luxury outerwear appears to be sinking a lot lower in these periods of seasonal weakness.

The stock flopped 37% in May, clobbering investors who adopted a contrarian mindset as shares gradually lost their momentum over the past year. While a 30% post-earnings drop may suggest that the last quarter (Q4 fiscal 2019) was abysmal, the numbers themselves weren’t actually as disgusting as you’d think. The Goose clocked in revenues that barely missed the mark by 2% ($156.2 million versus expectations for $159 million).

Fellow Fool contributor Will Ashworth certainly didn’t think the results were as bad as advertised by Mr. Market: “Overall, the results weren’t horrendous, as revenue grew 25% during the quarter to $156.2 million, which was $600,000 less than the consensus estimate and three cents higher than the $0.06 estimate.”

The real fly in the ointment was management’s lacklustre guidance, which shocked and horrified all those growth investors who thought that the Goose would be unstoppable. The Goose reduced its fiscal 2020 growth guidance by 20% — not a small downgrade by any means, but given the fickle nature of fashion retail and the associated uncertainties on the horizon, I do believe that CEO Dani Reiss and company is erring on the side of caution by conservatively lowering the bar so it can better the chances of pole-vaulting over it down the road.

Might as well rip the band-aid off all at once, right?

Simply put, the original bar was far too high given the slowing global economy and the risks associated with the U.S.-China spat that Canada found itself in the middle of thanks to the widely publicized arrest of Huawei’s CFO Meng Wanzhou in Vancouver.

It also didn’t help that around a year earlier, the firm clocked in a blowout quarter despite coming out of a period of seasonal weakness. If a quarter can cause a big double-digit surge on a beat, then you’d better watch out for a similar magnitude of moves to the downside in the event of an inevitable miss.

My takeaway?

The Goose is still a wonderful growth stock that’s in the early innings of its growth story. It’s just been hit with the perfect storm of medium-term headwinds. Now that the purge of weak-handed investors is all but done, I’d encourage Foolish investors to back up the truck today at under $50. Shares look absurdly undervalued, and should a peaceful resolution to the trade war happen within the next year; I sense a massive rally in Goose shares.

I’d say it’s a realistic double if the cards are dealt in the Goose’s favour over the coming months. Will the Goose fly back to a high in 2019? It can. Will it? Nobody knows, but I’m liking the risk-reward trade-off very much at this juncture.

Stay hungry. Stay Foolish.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Joey Frenette has no position in any of the stocks mentioned.

More on Investing

Nuclear power station cooling tower
Metals and Mining Stocks

If You’d Invested $1,000 in Cameco Stock 5 Years Ago, This Is How Much You’d Have Now

Cameco (TSX:CCO) stock still looks undervalued, despite a 258% rally. Can the uranium miner deliver more capital gains to shareholders?

Read more »

Businessman holding tablet and showing a growing virtual hologram of statistics, graph and chart with arrow up on dark background. Stock market. Business growth, planning and strategy concept
Dividend Stocks

TFSA Magic: Earn Enormous Passive Income That the CRA Can’t Touch

If you're seeking out passive income, with zero taxes involved, then get on board with a TFSA and this portfolio…

Read more »

Man with no money. Businessman holding empty wallet
Dividend Stocks

2 Stocks Under $50 New Investors Can Confidently Buy

There are some great stocks under $50 that every investor needs to know about. Here’s a look at two great…

Read more »

potted green plant grows up in arrow shape
Stocks for Beginners

3 Growth Stocks I’m Buying in April

These three growth stocks are up in the last year, and that is likely to continue on as we keep…

Read more »

clock time
Tech Stocks

Long-Term Investing: 3 Top Canadian Stocks You Can Buy for Under $20 a Share

These three under-$20 stocks offer excellent buying opportunities for long-term investors.

Read more »

Arrowings ascending on a chalkboard
Energy Stocks

Beat the TSX With This Cash-Gushing Dividend Stock

Canadian Natural Resources stock is well set up to beat the TSX as it continues to generate strong cash flows…

Read more »

think thought consider
Dividend Stocks

Down 10.88%: Is ATD Stock a Good Buy After Earnings?

Alimentation Couche-Tard (TSX:ATD) stock might not be the easy buy-case it once was. Here’s a look at what happened.

Read more »

money cash dividends
Dividend Stocks

TFSA Dividend Stocks: Earn $1,200/Year Tax-Free

Canadian stocks like Fortis are a must-have in your portfolio to earn tax-free yields for decades.

Read more »