On Friday, Citi analyst Paul Lejuez issued an updated price target for Tapestry Inc. (NYSE: NYSE:TPR), increasing it to $85.00 from the previous $60.00, while reiterating a Buy rating on the stock. The stock, currently trading at $73.62 and near its 52-week high of $74.54, has demonstrated remarkable momentum with a 102% return over the past year. According to InvestingPro analysis, the company maintains a GREAT financial health score of 3.1 out of 5. The adjustment comes with expectations for the company’s second-quarter sales and earnings per share (EPS) to outperform the consensus.
Lejuez projects a slight uptick in sales growth, forecasting a 1.6% increase compared to the consensus of 1.2%, aligning with management’s guidance of a 1-2% rise. For EPS, Citi’s model anticipates $1.76, which is higher than both the consensus estimate of $1.73 and the company’s guidance of approximately $1.70. Supporting this optimistic outlook, InvestingPro data shows impressive gross profit margins of 73.91% and strong operational efficiency. This forecast was made prior to Tapestry announcing a $2 billion Accelerated Share Repurchase (ASR) in November.
The analyst expects that the ASR will prompt management to revise its annual EPS guidance upwards by about $0.25, suggesting a new range of $4.75 to $4.80, up from $4.50 to $4.55. This is despite the consensus estimate currently standing at $4.66, with indications that it may not have been adjusted to reflect the ASR’s impact.
Lejuez highlights the Coach brand as a continuing strong performer for Tapestry, while also anticipating further profit improvements from the Kate Spade brand. Despite Tapestry’s stock price having surged over 40% since the first-quarter call, largely due to the cancellation of the merger agreement with Capri Holdings (NYSE:CPRI) on November 14, 2024, the analyst sees potential for further growth. He notes that Tapestry’s shares are trading at 13.4 times the forecasted fiscal year 2026 (ending in June) EPS, which is lower than Ralph Lauren (NYSE:RL)’s 18.5 times for the same period, indicating an opportunity for multiple expansion in addition to the anticipated EPS upside. With Tapestry’s next earnings report scheduled for February 6, 2025, investors can access comprehensive analysis and 15+ additional ProTips through InvestingPro’s detailed research report.
In other recent news, luxury conglomerate Richemont (SIX:CFR) recently reported a 10% increase in third-quarter sales, leading to notable gains for other luxury goods companies such as Estee Lauder (NYSE:EL) and Tapestry. The robust results were driven by strong demand in key markets, with record quarterly sales of €6.2 billion. The Swiss group’s performance suggests a favorable environment for related companies in the luxury sector.
CFRA recently downgraded Tapestry’s stock rating from Hold to Sell, while raising the price target to $56. Analyst Zachary Warring maintained the earnings per share (EPS) estimates for fiscal years 2025 and 2026 at $4.50 and $4.75, respectively. This decision reflects the belief that Tapestry has outperformed its peers and warrants a higher multiple.
Barclays (LON:BARC) upgraded Tapestry’s stock rating and raised the price target to $87. The analysts believe that Tapestry’s strategic pricing positions it to attract consumers seeking more value following price increases from European luxury brands. Jefferies also raised Tapestry’s stock from Hold to Buy and named it as a top pick for 2025, anticipating a low double-digit percentage increase in earnings per share compound annual growth rate (EPS CAGR).
Lastly, Bernstein expects large global brands like Tapestry to experience minimal impact from a potential 10% increase in import tariffs on China, due to their diversified supply chains and international market presence. The firm anticipates a slight increase in gross margins from tariffs and a further slight rise due to broader cost-of-goods-sold (COGS) inflation.
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