Tapestry stock rating upgraded, target soars to $110 at Redburn

On Tuesday, Redburn-Atlantic elevated Tapestry Inc. (NYSE: NYSE:TPR) stock from Neutral to Buy, setting a new price target of $110.00, a substantial increase from the previous target. This upgrade reflects the analyst's positive outlook on the company's growth prospects and brand momentum, particularly for its core Coach brand. The stock has shown remarkable momentum, delivering a 97% return over the past year and currently trading near its 52-week high of $88.07. According to InvestingPro analysis, Tapestry maintains impressive gross profit margins of 75% and has consistently maintained dividend payments for 17 consecutive years.

Tapestry's position in the premium accessories market has strengthened, with the analyst noting accelerated brand momentum for Coach over the past year. Based on Redburn-Atlantic's analysis, there is potential for further sales growth and margin expansion. The smaller brands in Tapestry's portfolio, especially Kate Spade, are seen as opportunities for long-term improvement. With a market capitalization of $18.16 billion and strong financial health metrics from InvestingPro, including liquid assets exceeding short-term obligations, the company appears well-positioned for continued growth.

The analyst's comments also highlighted that while investors have started to recognize Tapestry's potential, earnings expectations and valuation have yet to fully reflect this optimism. This lag is attributed to the previously existing Capri overhang, which has since been resolved.

Redburn-Atlantic's upgraded estimates suggest a mid-teens earnings per share (EPS) compound annual growth rate (CAGR) extending to 2028E, which surpasses the consensus. The current 12-month forward price-to-earnings (P/E) ratio stands at 16.9x, which the analyst considers attractive given the anticipated growth trajectory.

The new price target of $110.00, up from a scenario-based target of $45.00, indicates an expected upside of 25%. This revised target is supported by Tapestry's strong cash flow generation, as well as the anticipated earnings growth, according to Redburn-Atlantic's analysis.

In other recent news, Tapestry has been the subject of several analyst upgrades. JPMorgan raised the price target for Tapestry to $104, citing significant growth in the company, particularly the Coach brand, following strategic investments. In parallel, TD Cowen maintained a Hold rating on Tapestry while raising the price target from $52.00 to $90.00, following the company's strong second-quarter results, which included earnings per share (EPS) of $2.00, surpassing market expectations.

Telsey Advisory Group also increased its price target for Tapestry to $92, maintaining an Outperform rating. This adjustment was based on Tapestry's strong performance amid a challenging macroeconomic environment and robust gross margin expansion. Additionally, Citi raised its price target for Tapestry to $85.00, reiterating a Buy rating. This adjustment was made with the expectation that the company's second-quarter sales and EPS would outperform the consensus.

These recent developments reflect a positive outlook on Tapestry's financial performance and growth trajectory. The company's successful turnaround efforts, operational efficiency, and disciplined execution have been recognized by these analysts. Tapestry's focus on data and a consumer-centric approach has been a key component of its strategy, laying a solid foundation for the company's recent success. These analyst upgrades suggest a bullish outlook for Tapestry, reflecting the potential for continued positive developments from the company.

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