Bullish indicating open at $55-$60, IPO prices at $37
On Tuesday, Bath & Body Works Inc. (NYSE:BBWI) shares received a positive assessment from JPMorgan, as the firm's analyst, Matthew Boss, raised the stock rating from Neutral to Overweight. The new price target set by JPMorgan stands at $47.00, a significant increase from the previous target of $41.00. This adjustment reflects a more optimistic outlook for the company's financial performance into fiscal year 2025.
The upgrade is supported by what JPMorgan describes as a "fundamental inflection" in both revenue and earnings for Bath & Body Works. Boss pointed to recent research and conversations with management that suggest an upward trajectory for the company's top and bottom lines moving into the next fiscal year. Additionally, he noted a near-term catalyst in the first quarter that could further bolster the company's performance.
The valuation of Bath & Body Works also played a key role in the upgraded rating. According to Boss, the stock has significantly underperformed the S&P 500 index over the past three years, with shares currently trading at approximately 9 times the firm's projected earnings for fiscal year 2026. This represents a 40% discount compared to the company's beauty industry peers.
Despite the underperformance, Bath & Body Works is recognized for maintaining a high operating margin in the teens and a low single-digit growth rate at the top line. Based on a peer regression analysis, JPMorgan suggests that the equity value of Bath & Body Works could potentially reach $65.
In summary, the new Overweight rating and elevated price target from JPMorgan reflect a combination of improved business prospects for Bath & Body Works, a favorable valuation gap compared to industry counterparts, and the potential for significant equity value growth as projected by the firm's analysts.
In other recent news, Bath & Body Works Inc. announced a significant change in its executive team with the departure of its Chief Human Resources Officer, Deon Riley, effective January 31, 2025. Meanwhile, the company also declared its plan to redeem all remaining 9.375% Senior Notes due 2025, a strategic financial move aimed at managing its debt. On the analyst front, Goldman Sachs reiterated a Buy rating on Bath & Body Works, citing potential for sales stabilization and sustainable top-line growth. TD Cowen also expressed a positive outlook, raising the price target on the company's stock while maintaining a Buy rating and naming it the Best Idea for 2025. These recent developments reflect strategic shifts in leadership, financial management, and market expectations for Bath & Body Works.
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