Carter’s (NYSE:CRI) moved higher in premarket trading on Monday, gaining 3.5% after Wells Fargo upgraded the children’s apparel retailer to Equal Weight from Underweight and raised its price target to $42 from $30.
Analyst Ike Boruchow cited improving execution under the company’s new leadership team, continued momentum in direct-to-consumer operations and the potential impact of lower tariff rates as key reasons behind the more constructive outlook.
Leadership Changes and DTC Strategy Drive Improved View
According to Wells Fargo, recent management changes and refinements to Carter’s direct-to-consumer strategy are helping strengthen the company’s operating model.
“The combo of new leadership + evolved DTC strategies is driving fundamental improvements in the model in our view. At the same time, we believe CRI has some very under-appreciated inorganic upside via lower tariff rates,” Boruchow commented.
The firm believes these developments are creating a more favorable backdrop for future earnings growth.
Positive Expectations Ahead of Quarterly Results
Wells Fargo increased its forecast for second-quarter comparable sales and expects the upcoming earnings release to act as a potential catalyst for the stock.
The analyst also anticipates that both third-quarter guidance and profit margins could come in ahead of current market expectations, reflecting improving business trends.
Earnings Forecasts Revised Higher
The brokerage raised its fiscal 2026 earnings-per-share estimate to $3.30 from $3.00 and increased its fiscal 2027 forecast to $3.80 from $3.50.
Both projections sit above Wall Street consensus estimates, which currently stand at $3.22 for fiscal 2026 and $3.61 for fiscal 2027.
Higher Valuation Target
Wells Fargo’s new $42 price target is based on 11 times its projected fiscal 2027 earnings per share.
The revised valuation reflects the firm’s view that operational improvements, stronger consumer-direct performance and potential tariff-related benefits could support additional upside for Carter’s over the medium term.