On Wednesday, DA Davidson maintained a positive outlook on shares of Coty Inc . (NYSE: NYSE:COTY), increasing the price target on the company's shares to $17.00 from $16.50, while reiterating a Buy rating. The firm acknowledges Coty's performance in the fourth quarter of fiscal year 2024, which, although slightly below market expectations, surpassed their own estimates.
The beauty company has reported its third consecutive year of double-digit growth in organic sales and operating profit. Moreover, Coty's net leverage ratio has improved to 3.3 times.
The company has provided guidance for an acceleration in organic sales growth in the first quarter of fiscal year 2025, with even higher growth expected in the second half of the same fiscal year. Coty's projected EBITDA for fiscal year 2025 is anticipated to increase by 9% to 11%, reaching between $1,186 million and $1,208 million. This forecast surpasses the consensus estimate of $1,183 million.
DA Davidson has responded to Coty's outlook by raising their own expectations for the company's EBITDA growth in fiscal year 2025 to 10%, up from the previous 9%.
The new stock price target is based on a valuation of 13.5 times the expected EBITDA for calendar year 2025, which DA Davidson has adjusted upward from $1,254 million to $1,265 million. The firm also notes that Coty's shares are trading at a multiple of 8.5 times their estimated EBITDA for calendar year 2025, suggesting that the stock is undervalued given Coty's high growth trajectory and consistent performance.
In other recent news, Coty Inc. posted mixed fourth-quarter results for fiscal year 2024, with a like-for-like sales growth of 5%. The adjusted EBITDA for the quarter was reported at $165 million, matching the consensus.
The company's guidance for fiscal year 2025 suggests a like-for-like sales growth of 6%-8%, aligning with the consensus of approximately 6%. The adjusted EBITDA for the upcoming fiscal year is projected to be between $1,186 million and $1,208 million.
Stifel maintained a Hold rating on Coty Inc. stock but lowered the shares target to $11.00 from the previous $12.00 following the fourth-quarter results. On the other hand, Citi reaffirmed its Neutral rating on Coty Inc. stock, with a steady price target of $11.00, highlighting the company's alignment with market expectations.
These developments come as Coty Inc. reported an 11% like-for-like revenue growth for the full fiscal year 2024, surpassing its guidance range of 9-11%. The prestige fragrance revenues grew by a mid-teens percentage in FY24, outpacing the broader market's 10% growth. For fiscal year 2025, Coty anticipates results that align with its medium-term targets of 6-8% like-for-like revenue growth and 9-11% adjusted EBITDA growth.
InvestingPro Insights
Recent data from InvestingPro enriches the positive outlook on Coty Inc. (NYSE: COTY) shared by DA Davidson. With a market capitalization of $8.49 billion, Coty's financial health is reflected in its impressive gross profit margin of 64.09% over the last twelve months as of Q3 2024, showcasing the company's efficiency in managing its cost of goods sold. This aligns with the firm's reported third consecutive year of double-digit growth in organic sales and operating profit. Moreover, the company's revenue growth of 13.69% during the same period signifies a robust upward trajectory.
Despite the positive gross profit margins, Coty is currently trading at a high earnings multiple, with a P/E ratio of 109.36 and an adjusted P/E ratio of 41.76. This suggests that the market has high expectations for the company's future earnings. Investors should note that Coty does not pay dividends, which may be a consideration for those seeking income-generating investments. For a more comprehensive analysis, there are 16 additional InvestingPro Tips available at https://www.investing.com/pro/COTY, which can provide deeper insights into Coty's financials and market expectations.
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