DA Davidson adjusted its outlook on Coty Inc . (NYSE: NYSE:COTY), reducing the price target from the previous $17.00 to $14.50, while still endorsing the stock with a Buy rating. The firm's analyst cited a pre-announcement by Coty that its organic sales for the first quarter of fiscal year 2025 are expected to increase by 4%-5% year-over-year, which is marginally below the anticipated 6%. Furthermore, Coty's EBITDA is projected to remain unchanged or possibly decline, a shift from the previously estimated 7% year-over-year growth.
The cosmetics giant is ramping up its cost-saving initiatives and continues to project an EBITDA increase of 9%-11% for the full fiscal year 2025, irrespective of the sales figures. However, industry growth in the U.S. has decelerated, and retailers are scaling back their inventories not only in the U.S. but also in Australia, China, and across Asian travel retail outlets.
In light of the slower growth rates, DA Davidson has also lowered the target multiple from 13.5x to 12.0x. This recalibration is based on a revised EBITDA estimate of $1,250 million for the calendar year 2025, which is a slight decrease from the former projection of $1,265 million. Despite the downward adjustments, the firm maintains a positive outlook on Coty's stock with a continued Buy recommendation.
Coty Inc. underperformed in its first-quarter fiscal year 2025 results, with a like-for-like sales growth of 4-5%, falling short of the projected 6%. The company's EBITDA for the same period is expected to be approximately flat or slightly lower year-over-year. Financial services company, Stifel, responded to these figures by reducing its price target for Coty from $11 to $10, while maintaining a Hold rating. On the other hand, analyst firms RBC Capital and Canaccord Genuity have maintained their positive outlooks, keeping their price targets at $14.
JPMorgan (NYSE:JPM) also adjusted its price target for Coty from $11 to $10, maintaining a Neutral rating. Despite these adjustments, Coty has reiterated its full-year adjusted EBITDA growth projections at 9%-11%. The beauty company also announced the formation of its first Scientific Advisory Board to guide skincare research and development. Jefferies upgraded Coty to a Buy rating, citing the company's strong position in the premium fragrance market.
InvestingPro Insights
Recent data from InvestingPro sheds additional light on Coty's financial position and market performance, complementing DA Davidson's analysis. Despite the lowered price target, Coty's market capitalization stands at $7.1 billion, reflecting its significant presence in the cosmetics industry. The company's revenue for the last twelve months reached $6.12 billion, with a notable revenue growth of 10.15% over the same period.
InvestingPro Tips highlight that Coty is expected to remain profitable this year, aligning with the company's projected EBITDA increase for fiscal year 2025. However, investors should note that the stock has experienced significant volatility recently, with a 19.25% price decline over the past three months and an 8.91% drop in just the last week. This volatility underscores the challenges mentioned in DA Davidson's report regarding slowing industry growth and inventory reductions.
For those seeking a more comprehensive analysis, InvestingPro offers 11 additional tips on Coty, providing deeper insights into the company's financial health and market position.
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