Why Coach Might Keep Pulling Back

While Fools should generally take the opinion of Wall Street with a grain of salt, it's not a bad idea to take a look at particularly stock-shaking analyst upgrades and downgrades -- just in case their reasoning behind the call makes sense.

What: Shares of Coach (NYSE: COH  ) sank about 2% today after Canaccord Genuity downgraded the luxury handbag company from buy to hold.

So what: Along with the downgrade, analyst Laura Champine lowered her price target to $62 ($from 65), representing about 14% worth of upside to Friday's close. While bargain-hunters might be attracted to Coach's recent weakness, Champine cautions that increasing competition could continue to weigh on the shares.

Now what: Canaccord expects Coach's U.S. same-store sales to decline 6% in the third quarter. "Traffic trends appear to be deteriorating, and we believe Coach will be hard pressed to maintain its leading 30% market share with the current product in stores," noted Canaccord. "We expect fast-growing rival Michael Kors will continue to gain ground. ... Given the limited near-term visibility, we are downgrading shares of Coach to Hold from Buy." Of course, with the stock off about 15% from its 52-week highs and trading at a forward P/E of 12, believers in Coach's brand power might want to use that worry to make a long-term commitment. 

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