On Wednesday, Telsey Advisory Group updated its outlook on shares of Victoria's Secret (NYSE:VSCO), increasing the price target to $40 from the previous $27, while retaining a Market Perform rating on the stock.
The adjustment follows a recent company event in mid-October where new CEO Hillary Super was introduced to the sell side. The Telsey analyst expressed a positive view on Super's relevant experience and the potential for brand evolution and sustainable growth.
Since Hillary Super's appointment as CEO on September 9, Victoria's Secret has seen improved merchandising efforts that have contributed to sequentially better quarterly sales results in North America.
The trend is anticipated to extend into the fifth consecutive quarter, according to third-quarter guidance. The company had previously reported second-quarter earnings at the end of August that slightly exceeded pre-announced expectations.
Despite these positive developments, the analyst noted that challenges remain, particularly with the PINK brand and the broader intimates category, which continues to show weakness. Additionally, CEO Super is still in the preliminary phase of evaluating the brand portfolio and the company's organizational structure.
The new price target of $40 reflects a 16.8x multiple on the two-year forward EPS estimate of $2.38, which aligns with the current near-term market multiple. This valuation is based on the expectation that Victoria's Secret will maintain its trajectory of improvement under the guidance of its new leadership.
In other recent news, Victoria's Secret has been making strategic moves to revitalize its brands and operations. TD Cowen reaffirmed their Hold rating for Victoria's Secret, maintaining a price target of $26.00, indicating the company's potential for positive change under new leadership. The firm emphasized the importance of successful execution as Victoria's Secret embarks on a transformation journey.
In addition, BMO Capital Markets increased Victoria's Secret's price target to $33, citing the new CEO's customer-centric strategies and potential for brand enhancement. Barclays (LON:BARC) also upgraded Victoria's Secret stock to Equal-weight and increased the price target to $25.00, reflecting a more balanced risk-reward perspective.
Victoria's Secret reported a slight dip in sales to $1.4 billion, marking its first year-over-year quarterly operating income growth since 2021. The company also announced changes to its executive leadership, with the departure of Brand President Greg Unis and Chief Customer Officer Christine Rupp.
These recent developments highlight Victoria's Secret's strategic efforts to adapt to a competitive retail environment and drive growth. The company has raised its financial outlook for fiscal 2024, expecting sales to decline by around 1% from the previous year. The new leadership and strategic direction under CEO Hillary Super are expected to contribute positively to the company's future performance.
InvestingPro Insights
Recent data from InvestingPro sheds additional light on Victoria's Secret's (NYSE:VSCO) current market position and performance. The company's stock has shown remarkable strength, with a 74.5% price total return over the past year and an impressive 80.64% return over the last six months. This aligns with the positive outlook expressed by Telsey Advisory Group and the improved merchandising efforts under new CEO Hillary Super.
InvestingPro Tips highlight that VSCO is trading near its 52-week high, with the stock price at 99.42% of its highest point over the past year. This strong performance is further supported by the fact that four analysts have revised their earnings upwards for the upcoming period, suggesting growing confidence in the company's future prospects.
However, investors should note that the stock's RSI suggests it may be in overbought territory, which could indicate a potential for short-term price consolidation. Additionally, with a Price to Book ratio of 6.24, the stock is trading at a relatively high multiple, which may be a consideration for value-oriented investors.
For those interested in a deeper analysis, InvestingPro offers 7 additional tips that could provide further insights into VSCO's investment potential.
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