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On Thursday, BofA Securities adjusted its outlook on Capri Holdings stock (NYSE:CPRI), reducing the price target from $23.00 to $21.00, while keeping a Neutral rating on the shares. The revision follows Capri Holdings’ fourth-quarter earnings per share (EPS) report, which showed a loss of $4.90, significantly missing both the analyst’s and Visible Alpha consensus estimates of a $0.13 and $0.16 loss per share, respectively. This shortfall was attributed primarily to a tax valuation allowance. According to InvestingPro data, the company has not been profitable over the last twelve months, with a current market capitalization of $2.13 billion.
Management at Capri Holdings has revised its fiscal year 2026 (F26) guidance, attributing the changes to the reclassification of Versace as a discontinued operation and the impact of tariffs. The company now anticipates F26 revenue to be between $3.3 billion and $3.4 billion, a decrease from the previous expectation of $3.59 billion, which excluded Versace’s figures. Additionally, the forecast for operating income has been lowered from $150 million to $100 million. The stock has experienced significant volatility, with a year-to-date decline of 14.34% and trading well below its 52-week high of $43.34.
Despite the reduction in F26 revenue and operating income projections, BofA Securities is maintaining its F26 earnings per share estimate. However, the firm has increased its fiscal year 2027 (F27) earnings per share estimate by 22% to account for the tariff pressures, which are expected to be partially offset by higher interest income from the sale of Versace. InvestingPro analysis reveals that Capri maintains impressive gross profit margins of nearly 64%, suggesting strong pricing power despite current challenges. Subscribers can access 8 additional ProTips and comprehensive financial metrics for deeper analysis.
The new price objective of $21 is now based on a 9 times forward fiscal year 2027 enterprise value to earnings before interest, taxes, depreciation, and amortization (EV/EBITDA) multiple, a decrease from the previously used 11 times multiple. The company currently trades at an EV/EBITDA multiple of 14.82x. This adjustment reflects the increased risks associated with the company’s turnaround efforts. The analyst has expressed a mixed outlook, noting that while there is potential for the Michael Kors and Jimmy Choo brands to recover from their current low sales and margins, this optimism is tempered by a more cautious view of the near-term fundamentals for Capri Holdings.
In other recent news, Capri Holdings has announced 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. This decision follows a mixed quarterly financial report where Capri Holdings exceeded sales expectations but fell short on earnings per share. Jefferies has responded by raising the price target for Capri Holdings to $17, maintaining a Hold rating, while UBS has kept a Neutral rating with a $14 target, anticipating that upcoming earnings will align with market expectations. Bernstein has maintained a Market Perform rating with a $20 price target, viewing the Versace sale as a strategic move that allows Capri to focus on its core brands, Michael Kors and Jimmy Choo.
The proceeds from the sale of Versace are intended to reduce Capri Holdings’ debt, with potential for future share buybacks, as noted by Jefferies. The sale is viewed by Bernstein as a beneficial step, despite the price being lower than expected, due to current economic uncertainties. UBS analyst Jay Sole suggests that Capri Holdings may not provide fiscal year 2026 guidance amid uncertainties surrounding tariffs and the Versace acquisition. The market is closely watching Capri Holdings’ financial disclosures and strategic plans, which could impact the company’s stock performance. As the luxury retail sector faces challenges from geopolitical tensions, the completion of the Versace sale remains a key focus for investors.
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