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UBS voiced cautiousness on Boot Barn Holdings (NYSE:BOOT) ahead of its earnings release on Wednesday.

In an “Evidence Lab” report, the bank’s analyst Jay Sole suggested that management may have trouble pleasing a fickle market on earnings day.

“Our conversations with investors suggest many believe the market is already pricing in a recession,” he told clients. “Thus, some may be willing to buy stocks at this point, but we think a key holdup is investors’ unwillingness to buy stocks likely to experience downward EPS revisions over the coming months.”

As such, he suspected that a strong earnings report with optimistic guidance may be a double -edged sword.

“If the company gives a strong outlook, the stock likely moves very little since investors will likely think the outlook is too bullish,” Sole explained. “However, if BOOT were to beat Q1 handily, give a solid 2QTD outlook, but then give a well-below consensus 2H23 outlook because of macro factors, then we think the stock could actually go up.”

The hang-up at hand for Sole is that the latter scenario is extremely unlikely, in his view. As such, he assigned a “Neutral” rating to the stock alongside an $80 price target.

“BOOT will probably deliver a roughly in-line 1Q23 result and provide positive 2QTD commentary indicating the sell-side’s 2Q forecast doesn’t need to change,” he surmised. “We don’t expect this will drive a sentiment shift given our conversations with investors suggest the market is also anticipating a solid 1Q and good 2QTD commentary.”

Boot Barn (BOOT) shares slid 2.4% shortly after Monday’s market open.

Options markets are anticipating an outsized reaction to the earnings release. According to UBS data, a 10.5% move is forecast after the report. Read more on the expectations for the retailer ahead of its report on Wednesday.

Image and article originally from seekingalpha.com. Read the original article here.

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