On Thursday, Jefferies raised Tapestry Inc. (NYSE:TPR) stock from Hold to Buy and increased the price target to $80 from the previous $50. The upgrade follows the completion of a deal with Capri Holdings Limited (NYSE:CPRI), which is now considered part of Tapestry's past. According to InvestingPro data, six analysts have recently revised their earnings estimates upward, with analyst targets ranging from $52 to $80.
The analyst anticipates that the market will begin to recognize Tapestry as a high-quality stock due to its improving sales growth, expanding margins, and share buyback program, which are expected to lead to a low double-digit percentage increase in earnings per share compound annual growth rate (EPS CAGR). This outlook is supported by Tapestry's impressive gross profit margin of 73.91% and strong financial health score of "GREAT" on InvestingPro.
Jefferies projects that these positive trends justify a price-to-earnings ratio (P/E) of over 13 times for Tapestry. In an optimistic scenario, the analyst sees the potential for the stock price to surpass $90. The analyst's confidence is bolstered by the performance of the Coach brand, which is a part of Tapestry's portfolio. Despite flat average unit retail (AUR) prices over the past 15 years, the brand continues to maintain its popularity.
The analyst notes that Tapestry's management has been executing their strategies effectively, which should contribute to a gradual increase in the company's valuation. With these factors in mind, Jefferies has named Tapestry as a Top Pick for the year 2025.
The endorsement reflects expectations of continued strong performance and effective management leading to further stock appreciation. The stock has already demonstrated strong momentum with a 73.71% year-to-date return, and InvestingPro analysis indicates the stock is currently trading near its Fair Value, with 12 additional ProTips available for subscribers.
In other recent news, Tapestry Inc. has been at the center of several notable developments. The company's financial outlook was revised from negative to stable by S&P Global Ratings, following the termination of a merger agreement with Capri Holdings Ltd. due to regulatory uncertainties.
Bernstein, a prominent financial research firm, expects large global brands like Tapestry to have a minimal impact from a potential 10% increase in import tariffs on China, thanks to their diversified supply chains and international market presence.
BofA Securities has reaffirmed a Buy rating on Tapestry Inc., increasing the price target from $65.00 to $75.00 following the completion of a $2 billion accelerated share repurchase agreement. In contrast, TD Cowen maintained its Hold rating on Tapestry, citing the success of the Coach brand in defying negative industry trends. Baird also maintained its Outperform rating on Tapestry, increasing the price target to $64.00 from $58.00, following the termination of a potential deal and the unveiling of a $2.8 billion stock buyback plan.
In terms of earnings and revenue, Tapestry's first-quarter results were robust, exceeding expectations, leading to an increase in full-year revenue and earnings guidance. The company reported a 27% increase in total revenue in Europe and a 5% decrease in Greater China. Despite these mixed results, Tapestry remains optimistic about its future, aiming for a full-year revenue growth of 1-2% and expecting to expand its gross margin by over 50 basis points by fiscal 2025. These are recent developments that provide valuable insights for investors.
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