BMO Capital raises Ralph Lauren price target to $205

On Friday, BMO Capital Markets adjusted its outlook on Ralph Lauren stock (NYSE:RL), increasing the price target to $205 from the previous $197 while maintaining an Underperform rating. The firm’s analyst recognized Ralph Lauren’s performance, noting that the company surpassed quarterly expectations on both the top and bottom lines, with sales and gross margin outpacing estimates. According to InvestingPro data, Ralph Lauren maintains impressive gross profit margins of 68.55% and has earned a "GREAT" financial health score, with 14 additional ProTips available for subscribers.

Ralph Lauren reported continued growth in average unit retail (AUR), albeit at a decelerated pace compared to the previous quarter’s 12% increase. The company’s management anticipates further growth into fiscal year 2026. The guidance for FY26 includes a low single-digit percentage increase in constant currency (CC) sales, with expectations of modest CC EBIT margin expansion, attributed to operational expense leverage and roughly stable CC gross margins. The company’s strong performance is reflected in its impressive 60.58% stock return over the past year, though InvestingPro analysis suggests the stock is currently trading above its Fair Value.

The company’s cash conversion has shown signs of improvement, highlighted by a notably low days payable outstanding (DPO). However, cash from operations remained approximately flat year over year, despite an adjusted earnings per share (EPS) increase of 33%. The fourth quarter reflected another strong period for sales and gross margin, yet it was marked by recurring one-time expenses and cash flow nuances. The analyst suggests that the guidance provided may be on the conservative side.

The new price target of $205 is based on approximately 14 times the firm’s estimated earnings per share for fiscal year 2027. Ralph Lauren’s recent financial performance and future outlook have led to this updated valuation by BMO Capital Markets.

In other recent news, Ralph Lauren reported strong fourth-quarter results for fiscal year 2025, with earnings per share (EPS) of $2.27, surpassing the expected $2.04. The company’s revenue reached $1.7 billion, exceeding the anticipated $1.64 billion, driven by a 10% increase in total company revenue. Despite macroeconomic uncertainties, Ralph Lauren’s management remains confident, projecting low single-digit revenue growth for fiscal year 2026, with a stronger performance expected in the first half of the year. Analysts have responded positively to these developments, with Jefferies raising its price target for Ralph Lauren stock to $328, citing robust fourth-quarter performance and brand strength. JPMorgan also increased its price target to $355, maintaining an Overweight rating, and highlighted the company’s continued revenue growth and lack of wholesale cancellations. TD Cowen raised the stock target to $308, noting strong sales in key categories like handbags and women’s apparel, while Needham reiterated a Buy rating with a $310 target, emphasizing Ralph Lauren’s conservative guidance and strong financial position. These recent developments indicate a positive outlook for Ralph Lauren, with analysts acknowledging the company’s strategic planning and potential for sustained growth.

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