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Investing.com - Berenberg downgraded Coty Inc. (NYSE:COTY) from Buy to Hold on Wednesday, lowering its price target to $5.05 from $6.50 amid concerns about delayed sales growth recovery. According to InvestingPro data, the company currently maintains impressive gross profit margins of 65%, though its overall financial health score is rated as "FAIR."
The downgrade follows a 21% decline in Coty’s stock price since March 24, 2025, when Berenberg initiated coverage. The stock has fallen nearly 52% over the past year, with particularly volatile price movements. The firm cited weaker-than-expected like-for-like sales growth in the third quarter of fiscal 2025 and lower management guidance for the first half of fiscal 2026 provided on August 20. InvestingPro analysis suggests the stock is currently undervalued, with 8 additional exclusive insights available to subscribers.
Berenberg has reduced its fiscal 2026 earnings per share forecast to $0.44 from $0.62, reflecting a weaker consumer outlook, inventory destocking, operating deleverage, anticipated tariff headwinds, and the restoration of variable compensation. The firm now expects fiscal 2026 EBIT margins to decline to 10.6%, a 70 basis point year-over-year decrease.
While Coty trades at a 12-month price-to-earnings ratio of 9.8x, representing a 72% discount to beauty sector bellwethers, Berenberg analysts indicated they "struggle to identify a near-term catalyst" for the stock. The company’s enterprise value to EBITDA ratio stands at 7.5x, with seven analysts recently revising their earnings estimates downward. Discover more detailed valuation metrics and comprehensive analysis with a InvestingPro subscription, including access to the full Pro Research Report.
The research firm noted that Coty has not announced a new date for its investor day, which was originally scheduled for June 2025 but subsequently postponed, and the absence of explicit guidance for the second half of fiscal 2026 suggests limited management visibility on the company’s growth outlook.
In other recent news, Coty Inc . has faced several financial challenges and analyst reactions. The company reported fourth-quarter results that missed earnings expectations, with earnings per share at -5 cents compared to the anticipated +1 cent. Sales in the Prestige segment fell by 7%, while Consumer Beauty sales dropped by 12%, contributing to a 9% year-over-year decline in like-for-like sales. In response to these results, S&P Global Ratings revised its outlook on Coty to negative from stable, citing leverage concerns above a threshold of 4x. Analysts from TD Cowen, Wells Fargo, and Goldman Sachs have also lowered their price targets for Coty, citing issues such as inventory destocking, valuation concerns, and mixed quarterly results. TD Cowen and Wells Fargo both set their price targets at $4, while Goldman Sachs adjusted its target to $4.50. Additionally, RBC Capital reduced its price target to $10, maintaining an Outperform rating but noting underwhelming guidance for the first half of fiscal year 2026. These developments highlight the challenges Coty is currently facing in the market.
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