CTAs are almost max long in equities, have very limited room to buy: UBS
On Friday, Bernstein SocGen Group maintained a Market Perform rating and a $20.00 price target on Capri Holdings (NYSE:CPRI) stock, which currently trades at $14.40, having fallen over 64% in the past year. The firm acknowledged Capri Holdings' announcement of a definitive agreement to sell the Versace brand to Prada (OTC:PRDSY) for $1.375 billion, a transaction expected to close in the second half of 2025. According to InvestingPro data, the company's market capitalization stands at $1.69 billion. This valuation corresponds to approximately 1.7 times the projected fiscal year 2026 sales of $813 million for Versace.
The sale, which had been speculated in the media for several months, was officially confirmed by Capri today. Bernstein analysts had anticipated the divestiture and endorsed it as a strategic move for Capri Holdings, although the sale price was below their expectations. They had estimated a sales multiple in the range of 1.8 to 2.0 times. The company maintains impressive gross profit margins of nearly 64%, though revenue has declined by 12.3% over the last twelve months.
According to Bernstein, the lower sale price likely reflects current challenges in the consumer discretionary sector and broader economic uncertainties. The firm has previously discussed the potential benefits of Capri Holdings breaking up its brand portfolio, which includes the possibility of concentrating on its core brand, Michael Kors. The sale of Versace is expected to enable management to focus on Michael Kors, reduce its substantial debt-to-equity ratio of 2.92, and offer investors a more straightforward single-brand narrative. InvestingPro analysis shows that while the company faces current challenges, analysts expect it to return to profitability this year.
The analysts also mentioned that, while the sale currently only involves Versace, they believe that divesting Jimmy Choo would also be a beneficial step for Capri Holdings. The move to sell Versace is part of a broader strategy that Bernstein has outlined, which could streamline the company's operations and potentially enhance its financial health and market performance. For deeper insights into Capri Holdings' financial health and additional ProTips, visit InvestingPro, where subscribers can access comprehensive analysis and valuation metrics.
In other recent news, Prada has announced its acquisition of Versace for $1.375 billion, marking a significant merger in the luxury fashion industry. This strategic move aims to strengthen Prada's position amidst a challenging market for luxury goods. The acquisition price is notably lower than the $2.15 billion paid by Capri Holdings in 2018. Meanwhile, Capri Holdings has appointed Dario Vitale as the new Chief Creative Officer for Versace, effective from April 1, 2025. Vitale previously held a leadership role at Miu Miu and is expected to bring fresh perspectives to Versace's creative direction. Donatella Versace will transition to Chief Brand Ambassador, focusing on the brand's global philanthropic efforts. Additionally, Capri Holdings announced a CFO transition, with Rajal Mehta stepping in as Interim CFO following Thomas J. Edwards, Jr.'s departure. These developments come as the company navigates a shifting luxury market landscape.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.