By Vlad Schepkov
Goldman Sachs analysts issued a double upgrade on shares of VF Corp (NYSE:VFC), raising their rating to Buy from Sell with an increased $27 price target (from $26), as they believe "the stock is nearing an inflection point with the balance of catalysts for the stock now weighted to the upside."
In their latest note on the global apparent and footwear giant, the analysts point to VFC's extreme underperformance over the past two years - 'VFC is -73% vs. S&P 500 -5% and our coverage average of -35%' - and believes the low valuation coupled with the company's turnaround initiates will "drive relative outperformance in the stock."
In particular, they list several key bullish developments:
1. 'A sequentially stronger new product innovation pipeline at Vans, which combined with better retail merchandising and wholesale distribution optimization should help stem declines in North America revenues.'
2. 'Enhanced operational focus, with better inventory management and cost control delivering stronger FCF in FY24.'
3. 'Strategic optionality from new management, where we highlight VFC is in talks to find a new permanent CEO and has recently appointed new leaders at Vans, Dickies, and emerging brands.'
The analysts also list the reopening of Chinese economy, as well as the company's fruitful efforts at balance sheet deleveraging with a recent new debt placement, as additional tailwinds.
Overall, Goldman Sachs believes "negative catalysts are increasingly in the rearview mirror," and now rates VFC shares a Buy (from Sell) with a $27 price target (from $26), implying nearly 25% upside from yesterday's closing price of $21.82.