On Friday, Jefferies analysts increased the price target on Ralph Lauren (NYSE:RL) shares, trading on the New York Stock Exchange (NYSE: RL), to $280 from the previous target of $245. The analysts retained a Buy rating on the stock.
The revision reflects a positive outlook on the company's consistent low to mid-single-digit percentage sales growth and double-digit earnings per share algorithm. Ralph Lauren's strategy of shifting focus towards direct-to-consumer sales and the growing interest from younger consumers were highlighted as key drivers for the brand's momentum.
The analysts pointed out that Ralph Lauren could be underestimated by the market as an alternative to luxury sector investments due to its lower valuation multiple and stronger performance in China. They noted the brand's increasing 'heat', as indicated by alternative data, which supports the potential for continued average unit retail growth and possible sales upside in North America.
Despite the increased foreign exchange headwinds since the company's guidance, Helgans anticipates gross margin percentage outperformance for Ralph Lauren. The new price target of $280 is based on a 21 times price-to-earnings ratio, compared to the roughly 15 times 10-year average. This valuation represents a 1.5 times price-to-earnings growth ratio, which is in line with apparel industry peers but remains below the luxury sector's 2.7 times multiple.
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