UPDATE: Brean Capital Upgrades Tilly's As Q3 And QTD Q4 Results Suggest Turnaround Is Underway

In a report published Thursday, Brean Capital analyst Liz Pierce upgraded the rating on

from Hold to Buy, and named an $18.00 price target. In the report, Brean Capital noted, “Based on better-than-expected QTD results as well as better-than-expected Q3 results, we believe the company's efforts to differentiate its merchandise offering are paying off. We further believe that even though the shares have nearly doubled since the end of Q3, there are near-term catalysts that will drive further multiple expansion including upcoming easy compares as well as an improving macro picture, i.e. lower gas prices and lower unemployment levels. In our view, better-than-expected Holiday sales suggest that the improving macro climate is starting to have a positive impact on the sector. Finally, TLYS is one of the few specialty retailers that still has significant organic growth, both 4-wall and DTC, which bodes well for meaningful top-line growth; moreover, limited infrastructure spending on the horizon positions TLYS for significant operating margin leverage. Accordingly, we believe the company is entering a ‘beat and raise' earnings period and as such, we are upgrading the shares to a Buy rating from a Hold and establishing a target price of $18. Our $18 target price is based on a multiple of 25x our FY16 EPS of $0.72 and a PEG ratio of 1x.” Tilly's closed on Wednesday at $13.84.