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On Friday, UBS analyst Jay Sole increased the price target on Ralph Lauren (NYSE:RL) stock to $384 from $335, while keeping a Buy rating on the shares. The adjustment followed Ralph Lauren’s recent fourth-quarter earnings report, which Sole cited as a basis for the improved outlook on the company’s performance over the next twelve months (NTM). According to InvestingPro data, 11 analysts have recently revised their earnings estimates upward, with the stock currently trading at $274.08, suggesting significant potential upside to UBS’s target.
Sole’s optimism stems from the expectation of positive earnings per share (EPS) surprises that could lead to upward revisions in sell-side EPS estimates and a potential price-to-earnings (P/E) expansion. The analyst believes that these EPS beats will prompt the market to recognize the transformational changes Ralph Lauren has implemented in its brand image, distribution model, and cost structure. The company’s impressive gross profit margin of 68.55% and strong financial health score, as reported by InvestingPro, support this positive outlook.
The fourth-quarter report from Ralph Lauren, which was a key factor in Sole’s reassessment, demonstrated strong direct-to-consumer (DTC) sales growth. Notably, Ralph Lauren’s global DTC comp sales increased by 13% year-over-year. The growth was particularly robust in Europe and Asia, with sales up 18% and 15% respectively, and a solid 9% increase in North America, all calculated on an ex-FX basis. This performance marked an acceleration in all of Ralph Lauren’s geographies compared to the third quarter. The company’s overall revenue growth of 6.75% and year-to-date stock return of 19.1% reflect this strong operational performance.
Looking ahead, the analyst highlighted the upcoming Investor Day in September as a significant event that could further catalyze interest in Ralph Lauren stock. Additionally, Sole pointed out that the stock appears inexpensive at approximately 20 times the forecasted FY2e EPS. This is based on UBS’s projection of around an 8.5% five-year EPS compound annual growth rate (CAGR), implying a favorable risk-reward balance for investors. However, InvestingPro’s Fair Value analysis suggests the stock is currently trading above its intrinsic value, with a P/E ratio of 23.89x and a PEG ratio of 1.13x.
Ralph Lauren’s fourth-quarter results have provided more confidence in the company’s trajectory and the strategic initiatives it has undertaken. With UBS’s revised price target and continued Buy rating, the market’s attention may now turn to the potential for Ralph Lauren to exceed performance expectations and further capitalize on its brand and operational enhancements. For deeper insights into Ralph Lauren’s valuation and growth prospects, investors can access the comprehensive Pro Research Report available exclusively on InvestingPro.
In other recent news, Ralph Lauren has reported strong financial results, surpassing expectations in both earnings and revenue. The company’s fourth-quarter earnings exceeded projections, with a revenue increase of 10% on a constant-currency basis and an EPS of $2.27, above the anticipated $2.04. Analysts have responded positively, with Jefferies raising its price target to $328 and maintaining a Buy rating, citing the brand’s robust performance and cautious fiscal guidance. Similarly, JPMorgan adjusted its price target to $355, reflecting confidence in Ralph Lauren’s earnings potential and sustained revenue growth.
TD Cowen also raised its target to $308, recognizing the company’s impressive sales performance across global regions and key product categories. Needham maintained a Buy rating with a $310 target, highlighting Ralph Lauren’s strong financial position and potential for double-digit EPS growth. BMO Capital Markets increased its price target to $205, noting the company’s outperformance in sales and gross margins. These developments underscore a general optimism among analysts about Ralph Lauren’s future growth prospects, despite acknowledging potential macroeconomic challenges.
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