Palantir a high-risk investment with ’a one-of-a-kind growth and margin model’
Investing.com - Maxim Group initiated coverage on Fossil (NASDAQ:FOSL) with a Buy rating and a $5.00 price target on Tuesday, citing the company’s early-stage turnaround strategy. The company, currently valued at $79.4 million, has shown significant volatility with an 11.3% gain in the past week, though InvestingPro data indicates the stock is operating with a significant debt burden.
The global watch company is implementing a multi-year recovery plan following a leadership change in 2024, according to Maxim Group. The turnaround centers on three pillars: refocusing on core analog watches, cutting $100 million in SG&A expenses, and strengthening the balance sheet.
Maxim Group expects Fossil’s sales to reach their lowest point in 2026 before returning to growth in 2027, with projected sales of $800 million, mid-to-high single-digit operating margins, and positive free cash flow. The firm highlighted Fossil’s portfolio of owned and licensed brands, including Diesel, Michael Kors, and Armani Exchange.
As of March 31, 2025, Fossil reported $78.3 million in cash and $179.5 million in debt, including $150 million in senior notes due in November 2026. Maxim Group noted that a capital raise will likely be necessary to address the maturing debt.
The $5 price target represents an enterprise value-to-sales multiple of 0.5x, in line with Fossil’s peers, compared to its current trading multiple of 0.2x based on 2026 estimates. Maxim Group is currently the only sell-side firm covering the stock, according to LSEG data.
In other recent news, Fossil Group Inc. reported its first-quarter 2025 earnings, revealing a decline in net sales to $239 million, a 6% decrease in constant currency. The company faced a challenging period with a negative earnings per share (EPS) of -$0.33. Despite these challenges, Fossil Group succeeded in expanding its gross margin by 880 basis points to 61.1% and improved its adjusted operating income from a loss of $20 million to a profit of $10 million. The company plans to close 50 additional stores in 2025 as part of its strategic initiatives. Analysts have shown interest in Fossil’s strategies for mitigating tariff impacts, and the company has expressed confidence in its supply chain’s flexibility. Additionally, Fossil Group anticipates a decline in full-year net sales in the mid-to-high teens, with efforts to narrow sales declines in the remaining quarters of 2025. The company’s focus on higher-margin products and reduced promotional activities contributed to its improved financial performance.
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