Citigroup (NYSE: C) downgraded Williams Sonoma (NYSE: WSM), despite having an extremely profitable fourth quarter to a “Hold” rating, down from a “Buy” rating, saying that the company’s operating margin expansion is now fully priced into the stock and the company’s stock has limited upside.
Citi analyst Kate McShane said, “Since the end of August, WSM’s stock price is up roughly 55%. WSM stock is currently trading at 17x our new FY12 EPS of $1.57. We think stock upside is limited up to our target multiple of 18x, which is similar to its 5 year average. All else equal, we could become more positive if the stock pulled back to $22.”
Citigroup said that there was still risk to the upside as management guided higher, which could be conservative.
