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Piper Sandler analysts upgraded Coty (NYSE:COTY) to “Overweight” from “Neutral” and raised their Price Target to $10 from $8, citing favorable business and macro trends across Coty’s business.
In their latest note on the beauty company, the analysts highlight several developments COTY can benefit from:
1. “Increasing exposure to China and Travel Retail will allow for recovery tailwinds.”
2. “Greater focus on luxury and prestige beauty within both skincare and fragrance creates margin benefit.”
3. “Repositioning consumer portfolio has created share gains and should create a nice hedge in possible trade down scenario.”
The analysts sum up: “At a ~5-turn discount to peers and ~3.5-turn discount to 2021 average, and the progress we’re seeing, we think a narrower valuation gap vs. peers is warranted. We’re using ~13x FY’24 EBITDA (vs. ~10x previously and peers at ~17x).”
Shares of COTY are gaining over 1% on the first trading day of 2023, after losing nearly 20% in 2022.
