Groupe Dynamite Inc. (GRGD.TO) was upgraded to Strong Buy from Outperform at Raymond James on Wednesday.
Analyst Michael Glen lowered his price target on shares of the Canadian clothing company to $90 from $110 following its quarterly results on Tuesday.
The stock declined $26.70, or 36%, to $47.74 on the Toronto Stock Exchange.
"We are upgrading GRGD... on the back of an extremely outsized reaction to a scenario that was well-telegraphed," Glen said in a note to clients. "We also believe the 2Q SSSG guide was better than expected based on our interpretation of pre-quarter data and trends."
"Heading into 1Q, we had many conversations with buyside (Montreal / Toronto marketing) regarding Bloomberg alternative data," the analyst said. "There was clear debate surrounding the setup, with the largest concern being Bloomberg negative F2Q SSSG trends as of June 4 (see Ex 1: indication was -5%), which gradually improved through last week and now show an estimate of positive +2.15% (see Ex 2)."
"This is a sample data set, extrapolated to a broader conclusion, is widely followed (alongside other sources), changes daily, and most importantly, it has a lot of influence on GRGD's share price (and other specialty retailers including Aritzia Inc. (ATZ.TO)," Glen said.
"We have found is it is not necessarily the absolute number that is most relevant (history shows a wide error margin), but the overall trend."