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On Thursday, Canaccord Genuity analysts adjusted their stance on Coty Inc . (NYSE: NYSE:COTY), shifting from a "Buy" to a "Hold" rating and slashing the price target to $5.00 from the previous $8.00. The downgrade follows Coty’s third-quarter financial report for fiscal year 2025, released on May 6, which revealed a continuation of declining trends within the company. The stock, currently trading at $4.57, has fallen nearly 60% over the past year, with a particularly sharp 36% decline in the last six months.
Coty, known for its beauty products, has been experiencing a downturn across its business, particularly in its prestige segment, which was previously considered a strong point. The company’s recent earnings report marks the third consecutive quarter of lowered expectations, highlighting growing global consumer uncertainty and a normalization of beauty product demand. Despite these challenges, InvestingPro data shows the company maintains impressive gross profit margins of 65.4% and is expected to remain profitable this year.
The analysts at Canaccord Genuity expressed concerns over the potential impact of the uncertain outcome regarding the sale of Coty’s Wella portfolio. The sale had been anticipated to help Coty reduce its debt, which currently stands at $3.66 billion. However, without the sale, the path to deleveraging seems less clear, especially considering the company’s current ratio of 0.71 indicates short-term obligations exceed liquid assets.
In their commentary, the analysts noted that the downgrade was a response to the worsening trends and a lack of clear signs of recovery for Coty. They pointed out that the revised price target reflects the challenges Coty faces in achieving sales growth and reducing its leverage ratio. Initially, Coty aimed to lower its leverage to below 2.5 times by the end of fiscal year 2025, but this target now seems more difficult to attain. According to InvestingPro analysis, the stock appears undervalued at current levels, with 10+ additional ProTips available to subscribers, including detailed insights on the company’s financial health and growth prospects.
In other recent news, Coty Inc. reported its fiscal third-quarter 2025 earnings, which fell short of analyst expectations. The company posted earnings per share (EPS) of $0.01, significantly below the forecasted $0.06, and reported revenue of $1.3 billion, slightly under the anticipated $1.31 billion. Despite the earnings miss, Coty remains focused on future growth, particularly in its Prestige Fragrance segment, with plans for new product launches. The company is also aiming for EBITDA margin expansion and expects gradual improvement in fiscal 2026. Coty is implementing a €370 million cost-saving program to enhance operational efficiency. Analysts from Evercore and Citi discussed the company’s strategies, with a focus on retail inventory management and organizational changes in the U.S. market. These developments reflect Coty’s efforts to navigate a competitive beauty market and adapt to changing consumer dynamics.
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