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Williams-Sonoma (WSM), which I first wrote about here on Dec. 14, 2009, when it was at a price of $22.00, is a retailer I still like. Here's why:I predict that the higher-end retail chains like Williams-Sonoma will bounce back sooner than the general consumer retail. While the "frugal consumer" trend remains in force, the high-end consumer, encouraged by a recovering U.S. economy, will start to part with a few more bucks at the mall.
Look for a snap-back in the Williams-Sonoma chain (264 stores). The sales outlook is less certain for the Pottery Barn (204 stores) brand. The First Call FY2010/FY2011 EPS estimates for WSM are 81 cents to $1.02, which looks slightly low, according to my analysis.
Technically, there is danger of a head-and-shoulders formation over the past six months, but it doesn't appear to be strong enough to offset the uptrend.
2010 Outlook: I view Williams-Sonoma as a long-term play, but if investors are looking to sell WSM within the year, you might want to take your profits after it rises to $28 to $29, if it fails to clear $30.
Stock Analysis: I consider Williams-Sonoma to be a moderate-risk stock. If an investor has already purchased the company's shares, I'd hold them. If not, I'd consider buying a 25% position in WSM now; then another 25% in a month, if U.S. economic conditions don't worsen substantially. Under any circumstance, I wouldn't buy more than 50% of my WSM position before April 2010 and I'd put a sell/stop loss at $8.
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Disclosure: Lazzaro has no positions in stocks, but does own shares in two Pimco Bond Funds: PHDAX and PYMAX.
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