J. Crew Posts Strong Q4: Time to Take Profits?

The comparisons sure are getting easier. Gross margin expanded because not as much discounting was needed to bring in the money-spending traffic. If that trend can continue, then management will be able to drive further gains in the fundamental rebound.

Guidance for the upcoming fiscal year is set to come in between $2.20 per share and $2.30 per share. Although such a range doesn't automatically make the shares overly expensive, it might cause some investors to be wary of the company. During Tuesday's after-hours session, the stock was down over 1% at one point. Is this a signal that it's time to take profits?

It could be, at least for those with profits to take (which would be a lot of investors, considering the stock has been on an upswing over the last year and isn't too far off from a 52-week high). Here's how I see J. Crew: There's more upside left in the story, as the underlying business momentum seems to favor the strategies in place. But, when you look at how far the stock has come after it hit a single-digit 52-week low, would you blame anyone who suddenly sensed a desire for caution?

Not in the least. Realize your gains at this point if you are so inclined (although perform your own due diligence first). This isn't condemnation of the company; like I say, J. Crew should probably remain in an upswing. It's just a matter of the old cliche that captures the risk any market player faces with an equity that has experienced a huge run-up in value: the good news may already be priced in. You can always revisit the thesis at a later date after booking the gains. Still, kudos to J. Crew for a great conclusion to fiscal 2009.

Disclosure: I don't own any company mentioned; positions can change without notice.