On Thursday, CFRA raised its rating on Tapestry Inc. (NYSE: NYSE:TPR) from Hold to Buy, setting a price target of $47.00. The upgrade follows Tapestry's third-quarter earnings report, where the company posted normalized earnings per share (EPS) of $0.81, surpassing consensus estimates by $0.13, despite revenues falling slightly short at $1.48 billion versus the anticipated $1.51 billion.
Tapestry, the parent company of Coach , Kate Spade, and Stuart Weitzman, experienced mixed results across its brands during the quarter. Coach maintained its revenue year-over-year, while Kate Spade and Stuart Weitzman saw declines of 6% and 18%, respectively. The stability of Coach, Tapestry's largest brand, was a key factor in CFRA's decision to upgrade the stock.
Despite the mixed brand performance, Tapestry has affirmed its guidance for the full fiscal year. The company also remains confident in its planned acquisition of Capri, even as it faces a lawsuit from the Federal Trade Commission (FTC).
CFRA believes that Tapestry's shares are significantly undervalued, whether or not the merger with Capri proceeds. The firm's positive outlook is further supported by Tapestry's strong cash flow, with the company having generated $1 billion in the first nine months of its fiscal year. The stock's current trading value, which is below nine times the next twelve months' (NTM) EPS estimates, also contributed to the analyst's optimistic assessment.
InvestingPro Insights
Following CFRA's upgrade of Tapestry Inc. (NYSE: TPR), the latest data from InvestingPro provides additional context for investors considering the stock. Tapestry's market capitalization stands at $9.21 billion, showcasing the company's substantial size in the luxury fashion sector. The company is trading at a forward P/E ratio of 9.92, which is attractive when paired with its near-term earnings growth, indicating that the stock may be undervalued. This aligns with CFRA's assessment of the stock's value.
InvestingPro Tips highlight Tapestry's impressive gross profit margins of 72.28%, which are reflective of the company's ability to maintain high profitability in its operations. Additionally, the company's dividend yield is 3.59%, with a notable dividend growth of 16.67% over the last twelve months, signaling a strong return to investors and a commitment to sharing profits. Investors should also note that Tapestry has raised its dividend for three consecutive years and has maintained dividend payments for 16 consecutive years, reinforcing its reputation for providing shareholder value.
To explore more about Tapestry's financial health and stock performance, InvestingPro offers additional tips that could guide investment decisions. For those interested in deeper analysis, use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription at InvestingPro. There are 6 more InvestingPro Tips available that could provide further insights into Tapestry's market position and future prospects.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.