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On Wednesday, Wells Fargo (NYSE:WFC) analyst Ike Boruchow revised the firm’s stance on Victoria’s Secret (NYSE:VSCO), downgrading the stock from Equal Weight to Underweight. The price target was also significantly reduced, now set at $12.00, a sharp decline from the previous $25.00 target. According to InvestingPro data, the stock has already declined over 54% year-to-date, currently trading at $18.78 with a market capitalization of $1.48 billion.
Boruchow noted that despite Victoria’s Secret experiencing some positive momentum due to a refreshed management team and improvements in products and marketing strategies, the company’s position remains precarious. The downgrade reflects concerns about the potential impact of economic downturns on the demand for non-essential undergarments, which are considered more sensitive to recessions compared to other retail sectors. InvestingPro data shows the stock’s high volatility with a beta of 2.36, though the company remains profitable with an EBITDA of $585 million in the last twelve months.
In addition, the analyst expressed skepticism regarding Victoria’s Secret’s capacity to maintain or increase pricing power in the near future, a critical factor for the company’s success amidst potential market challenges.
The new price target of $12.00 is based on a 12 times multiple of the forecasted earnings per share (EPS) for the fiscal year 2027. Wells Fargo also provided a downside scenario, where the stock could drop to $10.00, based on approximately 10 times the estimated EPS of $1.00 for the fiscal year 2026. Conversely, an upside scenario was presented with a potential stock price of $24.00, which would require a 12 times multiple on an optimistic EPS of $2.00 for the fiscal year 2026, higher than the firm’s current estimate for that period.
In other recent news, Victoria’s Secret & Co. reported impressive fourth-quarter 2025 financial results, surpassing Wall Street’s expectations with an earnings per share of $2.60 compared to the forecast of $2.27. Revenue also beat predictions, reaching $2.11 billion against the anticipated $2.09 billion. Despite these positive results, UBS and TD Cowen analysts adjusted their price targets for Victoria’s Secret shares to $25 and $22.50, respectively, citing slower-than-expected sales growth and challenges in the first quarter of 2025. S&P Global Ratings revised its outlook on Victoria’s Secret to stable from negative, acknowledging improved operating performance and deleveraging, with net sales increasing by 1% and comparable same-store sales rising by 3%. The company announced leadership changes as part of its Path to Potential strategy, appointing new presidents for its Victoria’s Secret, PINK, and Beauty brands to enhance customer focus and drive brand expansion. Victoria’s Secret plans to open between 13 and 53 new stores in 2025 and is considering share repurchases under a board-approved program. The company anticipates low single-digit revenue growth for the remainder of the year, with a focus on product innovation and operational efficiency.
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