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On Thursday, Stifel analysts adjusted their outlook on Coty Inc . (NYSE: NYSE:COTY), a leading beauty company known for its Luxury and Consumer Beauty segments. The firm lowered its price target for Coty's shares to $6.50 from the previous $8.00, while reaffirming a Hold rating on the stock. Currently trading at $5.36, the company has seen its stock decline over 50% in the past year, according to InvestingPro data.
The revision comes amid observations that Coty's like-for-like sales growth has been lagging behind the overall global beauty market. This underperformance is attributed primarily to a decline in the Consumer Beauty division, which has been impacted by slowing sales in mass makeup and haircare products.
Stifel's analysts noted that Coty's new management has initiated cost-saving measures to mitigate the effects of reduced sales. Additionally, the company is striving to enhance its presence in the premium and skincare segments, which could potentially bolster its market position.
The Hold rating is influenced by the current macroeconomic uncertainty and the potential effects of reduced consumer spending on discretionary beauty purchases, including fragrances. Stifel's analysts have based their $6.50 price target on a 7x multiple of Coty's forecasted fiscal 2026 EBITDA.
Looking ahead, Stifel anticipates that Coty's ongoing productivity efforts and the ability to leverage its strong cash flow for significant acquisitions could provide a positive impact. The analysts also identified potential upside risks such as beneficial mergers and acquisitions, improved input costs, and market share gains in core product categories. However, they caution against downside risks that include volatility in emerging markets and heightened competition from both global and local players in the beauty industry. According to InvestingPro's Fair Value analysis, Coty appears undervalued at current levels, with additional insights available in the comprehensive Pro Research Report covering this $4.67 billion market cap company.
In other recent news, Coty Inc. reported a 3.3% decline in sales for the second quarter of fiscal year 2025, which was greater than the expected decrease of 0.2% to 0.4%. This performance led Canaccord Genuity to adjust their price target for Coty to $8, citing challenges in markets such as China and the U.S. consumer beauty segment. Raymond (NSE:RYMD) James also reduced their price target to $9, following Coty's lower-than-expected like-for-like sales, although they noted strong performance in the Prestige Fragrance segment. Meanwhile, DA Davidson maintained a Buy rating with a $12 price target, highlighting the positive social media engagement of Coty's brands and the anticipated sale of its Wella stake, expected to bring in at least $1 billion in 2025.
Jefferies also reaffirmed a Buy rating with an $8 price target, focusing on Coty's sale of the Skkn beauty brand to Skims and its intention to use the proceeds to reduce debt. Coty's management anticipates full-year 2025 sales to decline by 1% to 2%, with challenges persisting in the Consumer division. Despite these hurdles, Coty plans to boost long-term profitability through operational improvements and increased investment in marketing and distribution. The company is also preparing for two major product launches in fiscal year 2026 to drive future sales momentum.
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