BofA cuts Victoria’s Secret stock price target to $35

On Wednesday, BofA Securities adjusted its stance on Victoria’s Secret (NYSE:VSCO), reducing the price target on the company’s shares to $35 from the previous $40, while maintaining an Underperform rating. The stock, currently trading at $36.16, has shown significant volatility with a beta of 2.24, according to InvestingPro data. The revision comes despite Victoria’s Secret announcing holiday results that reached the higher end of their guidance. The lingerie retailer also refined its fourth-quarter sales forecast to a growth of 3-4%, an adjustment from the earlier range of 2-4%, accounting for a 400 basis point impact from the comparison to a 53-week fiscal year.

The company’s adjusted operating income projections were narrowed to $260-270 million, up from $240-270 million, and adjusted diluted earnings per share (EPS) estimates were amended to $2.20-2.30, slightly higher than the previous $2.00-2.30 range. With a market capitalization of $2.98 billion and trailing twelve-month revenue of $6.21 billion, Victoria’s Secret maintains a healthy gross profit margin of 44.56%. Victoria’s Secret saw an increase in customer traffic across both its physical stores and digital platforms, which was attributed to an enhanced product assortment and the impact of the Victoria’s Secret Fashion Show held in October.

The product innovations resonated well with customers at both Victoria’s Secret and PINK brands, with the beauty segment also reporting robust performance during the holiday season. Despite these positive developments, BofA Securities expressed concerns regarding the sustainability of sales momentum and the potential for further margin growth. InvestingPro analysis reveals additional insights about Victoria’s Secret’s valuation and growth prospects, with over 12 exclusive ProTips available for subscribers. According to InvestingPro’s Fair Value assessment, the stock currently appears overvalued relative to its fundamentals. The lowered price target is based on a 5x forward-looking enterprise value to EBITDA (EV/EBITDA) multiple for the fiscal year 2025, a decrease from the previous 6x multiple, reflecting uncertainties in the medium-term sales and margin outlook for Victoria’s Secret.

In other recent news, Victoria’s Secret appointed Scott Sekella as its new Chief Financial Officer, replacing Timothy Johnson upon his retirement in June. The company also updated its Q4 financial forecast, now expecting a sales growth rate of between 3% and 4%, and adjusted earnings per share between $2.20 and $2.30. Barclays (LON:BARC) upgraded Victoria’s Secret’s stock rating to Overweight and raised the price target to $53, citing a positive shift in the company’s promotional strategy. UBS also upgraded the company’s stock rating from Sell to Neutral, raising the price target to $47, due to signs of fundamental improvement and a more optimistic macroeconomic view. TD Cowen raised the price target on Victoria’s Secret shares to $45, acknowledging the company’s strong quarter and raised FY24 guidance, while JPMorgan upgraded the stock from Underweight to Neutral and lifted the price target to $45, recognizing the company’s cost reduction efforts and improved pricing strategy. These are recent developments in the company’s financial and operational performance.

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