Avondale cuts Tractor Supply target by almost 20%

Local investment bank Avondale Partners has bid farewell to one of its senior analysts and switched coverage of Tractor Supply. New analyst Mark Montagna, who also covers fellow locals Dollar General and Genesco, has promptly cut Tractor Supply to 'market perform' from 'outperform' and slashed his price target for the shares to $55 from $67.

Tractor Supply (Ticker: TSCO) are changing hands today just below $61.

Montagna this week took over coverage of Tractor Supply and several other specialty retailers from Jeff Black, who had been co-director of equity research at Avondale. Black, who joined the firm in mid-2012 and was promoted a little more than a year ago, has left Avondale for what CEO Pat Shepherd in a statement called "other opportunities in the investment management arena."

"We greatly appreciate his contributions to Avondale during his tenure with us and wish him all the best in pursuing a different side of the business," Shepherd said.

In a note to investors, Montagna said he's not upbeat on Tractor Supply's prospects for a number of reasons. Among them are concerns that a lot of big-ticket 2014 purchases were pulled forward into the second quarter, that the investments needed to build out the company's Western store network will slow profit growth and that overall consumer skittishness will hurt sales. Montagna added his $55 target could prove to be optimistic.

"We are concerned that if earnings compress, TSCO will also face a compressing valuation from its 3-year average of 23x. That could take shares substantially below our $55 PT," he wrote.

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