Stifel, a financial services company, has adjusted its outlook for Coty Inc . (NYSE: NYSE:COTY), reducing the price target to $10 from the previous $11 while maintaining a Hold rating on the stock.
The revision followed Coty's announcement of first-quarter fiscal year 2025 (September) sales and adjusted EBITDA that fell short of the company's own guidance.
Additionally, Coty's second-quarter fiscal year 2025 performance is projected to be under current consensus expectations, although an improvement is forecasted for the second half of the fiscal year.
Coty has reiterated its full-year adjusted EBITDA growth projections at 9%-11%. However, this affirmation suggests that the company anticipates over 20% year-over-year growth in the second half of fiscal year 2025, contrasting with the very modest growth seen in the first half.
This expected surge is attributed to accelerated productivity initiatives, even as like-for-like sales growth is predicted to be in the low single-digits for the first half, which is below the consensus of approximately 6%-7%.
In response to the updated performance figures and guidance from Coty, Stifel has revised its fiscal year 2025 and 2026 estimates for the company. The new price target of $10 is based on a 9x multiple of the projected fiscal year 2026 EBITDA. Stifel's lower multiple reflects the heightened uncertainty surrounding Coty's sales trends and those of the broader beauty category.
In other recent news, Coty Inc. reported preliminary results for the first quarter of fiscal year 2025, posting a 4-5% like-for-like sales growth, which fell short of the expected 6% growth. The company's EBITDA for the same period is expected to be roughly flat or slightly lower year-over-year.
Despite these outcomes, Coty has reaffirmed its full-year profit target. RBC Capital, Canaccord Genuity, and Jefferies have maintained their positive outlooks, with RBC and Canaccord keeping their price targets at $14 and Jefferies upgrading Coty to a Buy rating, citing the company's strong position in the premium fragrance market.
However, JPMorgan has reduced its price target for Coty from $11 to $10, while maintaining a Neutral rating. In addition, Coty recently announced the formation of its first Scientific Advisory Board to guide skincare research and development.
InvestingPro Insights
To provide additional context to Coty's current situation, let's examine some key financial metrics and insights from InvestingPro. Despite the recent challenges highlighted in the article, Coty maintains impressive gross profit margins, with InvestingPro data showing a gross profit margin of 64.39% for the last twelve months as of Q4 2024. This suggests that the company still has strong pricing power in its product lines, which could be crucial as it navigates the current slowdown in the beauty category.
However, investors should note that Coty is trading at a high earnings multiple, with a P/E ratio of 105.29. This valuation may be difficult to justify given the company's recent performance and the uncertainties in the market. An InvestingPro Tip indicates that Coty's stock price movements are quite volatile, which aligns with the challenges and market reactions described in the article.
On a positive note, another InvestingPro Tip suggests that net income is expected to grow this year, which could provide some support for the company's ambitious second-half growth projections mentioned in the article. For investors seeking a more comprehensive analysis, InvestingPro offers 5 additional tips for Coty, providing a deeper understanding of the company's financial health and market position.
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