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On Wednesday, Canaccord Genuity analysts adjusted their outlook on Coty Inc . (NYSE:COTY), reducing the price target to $8 from $10, while sustaining a Buy rating on the company’s shares. The stock, currently trading near its 52-week low of $6.13, has experienced a significant 31% decline over the past six months. According to InvestingPro analysis, the company appears undervalued based on its Fair Value metrics, with 10+ additional ProTips available for subscribers. The revision followed Coty’s announcement of its second-quarter fiscal year 2025 results on Tuesday after market close, which showed a sales decline of 3.3%, contrasting with the expected decrease of 0.2% to 0.4%. Like-for-like (LFL) sales decreased by 1%. Despite these challenges, the company maintains impressive gross profit margins of 65.4%, though its current ratio of 0.71 indicates some pressure on short-term liquidity.
Coty’s management highlighted several challenges, including a normalization in beauty demand, intensified by issues in China, Asia travel retail, Australia, and the U.S. consumer beauty market. Notably, despite healthy sell-outs, especially within the prestige fragrance category, the company did not observe retailer restocking during the quarter. Looking ahead, management now anticipates full-year 2025 LFL sales to mirror the second quarter’s performance, projecting a decline of 2% to 1% and reported sales to decrease by a low single-digit percentage year-over-year (YOY).
The Prestige segment is expected to maintain relatively stable LFL sales in the second half of 2025, while the Consumer division is projected to continue its downward trend. Despite the immediate challenges, Canaccord Genuity believes Coty’s management is enhancing long-term profitability through operational improvements and cost reduction efforts. The company also plans to increase investment in brand-demand building activities, including marketing and distribution expansion, along with preparing for two major product launches in fiscal year 2026 to boost sales momentum.
Moreover, Coty has made significant strides in reducing its debt, aiming to reach a leverage ratio of 2.5x or lower by the end of calendar year 2025. The lowered price target reflects the near-term headwinds, but Canaccord Genuity reaffirms their Buy rating, citing the potential for growth in the fragrance category and opportunities to expand the skin and cosmetics business. For a comprehensive analysis of Coty’s financial health and growth prospects, investors can access the detailed Pro Research Report available on InvestingPro, which covers over 1,400 US stocks with expert insights and actionable intelligence.
In other recent news, Coty Inc. has been in the spotlight with several significant developments. The company’s second-quarter sales fell short of expectations, leading Raymond (NSE:RYMD) James to cut Coty’s stock price target to $9 while maintaining an Outperform rating. The firm highlighted Coty’s Prestige Fragrance segment as a strong point, despite overall weaker trends in the market. In contrast, DA Davidson also reduced Coty’s stock price target, this time to $12, following a decrease in organic sales in their fiscal second quarter 2025 report.
Simultaneously, Moody’s (NYSE:MCO) Ratings upgraded Coty’s Corporate Family Rating, citing successful efforts in reducing financial leverage and strengthening its balance sheet. The rating agency expects Coty’s debt-to-EBITDA leverage to improve by December 2025, supported by modest revenue and earnings growth. However, Moody’s lowered Coty’s speculative grade liquidity rating due to upcoming senior secured notes maturities.
Despite these challenges, Coty remains optimistic about its ability to grow sales and outperform the beauty industry in the coming years. These recent developments underscore the dynamic nature of the market and the ongoing efforts by Coty to navigate these changes effectively.
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