The Accent Group Ltd (ASX: AX1) share price has jumped 5% on the day a broker upgraded their rating for the business.
Accent acts as the distributor for a number of large shoe brands including Skechers, Vans, Dr Martens, Hoka, Kappa and plenty more. It's responsible for a few other businesses in Australia including The Athlete's Foot, Glue Store, Nude Lucy and Stylerunner.
Broker upgrade
According to reporting by The Australian, the broker Morgan Stanley has become more positive on the ASX retail share.
Morgan Stanley now has an overweight rating on the company, which essentially means a buy, with a price target of $2.45.
A price target is where the broker thinks the share price will be in 12 months from the time of the note or investment rating.
Therefore, Morgan Stanley is suggesting the Accent share price could rise by another 20% from here, which is a sizeable return, particularly when you add the possible dividends that Accent may declare in the next year.
Accent shares recently went ex-dividend, which relates to the half-year dividend payment of 8.5 cents per share.
Is the Accent share price too cheap to ignore?
The Accent share price is down more than 20% from its 52-week high in April 2023, despite its gain today.
Due to this, the company is trading at 17 times FY24's estimated earnings (according to Commsec) and 13 times FY26's estimated earnings, assuming its earnings make a good recovery in FY25 and FY26.
In FY26 it's predicted to pay a grossed-up dividend yield of 10%.
I think it's quite possible the business can grow earnings at a good pace in FY25 and FY26 if the Australian economy remains strong and Accent keeps opening profitable new stores. It could also enlarge its growth runway if it acquires other promising brands. Glue Store is one of the recent additions which seems promising.
Time will tell if Morgan Stanley is right. I also personally believe in the Accent share opportunity, which is why I'm a shareholder and close to buying more shares.
