On Tuesday, DA Davidson adjusted its outlook on Coty Inc . (NYSE:COTY), a global beauty company, by reducing its price target to $16.50 from the previous $17.50. Despite this change, the firm has decided to maintain a Buy rating on the company's stock. Coty recently reported a favorable third fiscal quarter in 2024, showcasing a 10% rise in both organic sales and EBITDA.
The beauty company's performance has been particularly strong in the prestige fragrance market, which saw an increase to mid-teens growth rate from around 10% in the second fiscal quarter. Coty's market share has also expanded in this segment. However, DA Davidson has slightly lowered its expectations for the company's organic sales growth in the fourth fiscal quarter of 2024 to 4% year-over-year from an earlier forecast of 6%. This adjustment is attributed to challenging comparisons with the prior year due to retailer re-stocking.
Looking forward, the firm anticipates Coty to experience an acceleration in the first fiscal quarter of 2025. Despite maintaining the estimated EBITDA for the full fiscal year 2024, DA Davidson has cautiously revised its fiscal year 2025 EBITDA growth prediction to 9% year-over-year from the previously expected 11%. This conservative stance comes ahead of the company's official guidance issuance.
DA Davidson highlights Coty's effective execution, noting that the company is achieving growth above the industry average and is also reducing its financial leverage. The new price target is based on a 13.5 times multiple of the expected calendar year 2025 EBITDA, which has been adjusted down to $1,254 million from $1,285 million.
InvestingPro Insights
As Coty Inc. (NYSE:COTY) navigates through its fiscal year, real-time data from InvestingPro provides a snapshot of the company's financial health and market performance. With a market capitalization of $10.29 billion and a trailing twelve-month revenue of $6009.5 million as of Q2 2024, Coty has demonstrated a robust gross profit margin of 63.67%. This impressive margin underscores the company's ability to maintain profitability in the competitive beauty industry.
InvestingPro Tips highlight that Coty is trading at a low P/E ratio relative to near-term earnings growth, with a P/E ratio of 31.9, suggesting that the stock may be undervalued considering its growth prospects. Additionally, the company's stock price movements have been quite volatile, which could indicate a higher risk-reward scenario for investors. For those interested in delving deeper, InvestingPro offers more tips on Coty, which can be explored further at https://www.investing.com/pro/COTY. As an added bonus, use coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, where you'll find a total of 9 additional InvestingPro Tips for Coty.
The beauty company's recent performance in the prestige fragrance market and the expansion of its market share are reflected in the positive revenue growth figures, with a 14.07% increase over the last twelve months as of Q2 2024. These data points provide investors with a comprehensive view of Coty's current market position and future potential, complementing the analysis provided by DA Davidson.
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