Coty stock faces challenges as Raymond James maintains Market Perform

Investing.com - Raymond James has reiterated its Market Perform rating on Coty Inc. (NYSE:COTY) amid expectations of a challenging fourth fiscal quarter for the beauty company. The stock, currently trading at $5.07, has seen significant volatility this year with a -27% YTD return. According to InvestingPro analysis, the company shows impressive gross profit margins of 65.2%, though it currently appears undervalued based on Fair Value estimates.

The investment firm anticipates deceleration in Coty’s fragrance growth and retailer destocking, issues further complicated by inventory cleanup actions the company is undertaking. Raymond James notes that Coty’s mass market segment has struggled and expects these difficulties to continue. InvestingPro data reveals that short-term obligations exceed liquid assets, with a current ratio of 0.82, highlighting the company’s operational challenges.

The firm projects some relief for Coty’s prestige segment in fiscal year 2026, with launches including Hugo Boss Bottled already in market. This follows what Raymond James characterizes as a light fiscal year 2025 launch calendar primarily consisting of extensions to existing franchises, which typically generate half the sales of initial launches.

Coty’s Consumer Beauty division continues to face pressure, with the Cover Girl brand underperforming in a declining category, according to the investment firm’s analysis.

Raymond James also acknowledged recent press reports suggesting Coty is exploring strategic alternatives, though the firm believes market conviction in a potential deal remains low. While analysts maintain mixed views with a consensus rating of 2.39, InvestingPro subscribers can access 6 additional key insights and a comprehensive Pro Research Report, providing deeper analysis of Coty’s strategic position and growth potential.

In other recent news, Coty Inc . has been at the center of significant developments. The company announced changes to its board of directors, with Johannes Huth resigning as a director and Vice Chair after five years. This change was confirmed through a statement based on a recent SEC filing, and Coty clarified that Huth’s resignation was not due to any disagreements with the company. Additionally, industry sources have reported that Coty might be exploring a potential sale, considering the separation of its luxury and consumer divisions. Although Coty has not officially commented on these reports, the news has sparked interest in the company’s strategic direction. Jefferies has maintained its buy rating and a $6.00 price target on Coty, even amid these sale rumors. The possibility of divesting its business into separate entities has been a topic of discussion, but no official confirmation has been provided by Coty. These recent developments have captured the attention of investors and industry analysts alike.

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