On Friday, Citi analysts upgraded Capri Holdings Limited (NYSE:CPRI) stock from Neutral to Buy, while also increasing the price target to $29.00, up from the previous $21.00.
The decision comes after a period of underperformance from the company's brands, which the analysts believe does not warrant the market's current valuation, suggesting the brands are far from obsolete.
The analysts pointed out that Capri Holdings has faced challenges over the past few years, but argues that the market may be undervaluing the company. According to the analysts, there is a favorable risk/reward scenario for the stock, especially if the company's situation starts to improve. The upgrade reflects his belief in the potential upside for the stock, should the company show any signs of stabilization or improvement.
The analysts identified two primary catalysts that could drive Capri Holdings' stock higher. The first is any indication that the performance of its individual brands is stabilizing or improving, particularly as management refocuses on the business following a blocked merger attempt. The second potential catalyst for a stock increase would be the monetization of one or more of the company's brands. Citi notes that Capri Holdings has previously indicated openness to selling some of its assets, which could reveal the true market value of its portfolio.
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