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Raymond James analyst Olivia Tong initiated the research coverage on Bath & Body Works (NYSE:BBWI) at Strong Buy with a $45 per share price target.
The analyst believes that the current BBWI stock price is “discounting significantly worse trends, suggesting almost a complete wind-down of the growth the company realized during the pandemic.”
Tong added that shares have been “overly punished” so far, even if the U.S. enters into a recession that proves to be worse than that of 2008/2009.
On the fundamentals, Tong is very positive as she sees a long runway of growth ahead for BBWI once comps normalize.
“Our positive view is supported by: 1) leading market shares in Personal Care & Home Fragrances; 2) a mostly domestic, vertically-integrated supply chain, allowing BBWI to navigate logistics challenges better than peers; 3) square footage growth and optimization, including white space opportunities in new categories and geographies; 4) a loyalty program fully rolling out this year, which should drive improved retention; 5) margins at the high end of peers; and 6) strong cash generation, resulting in share buybacks along with its dividend,” Tong told clients in a note.
BBWI shares are down over 60% YTD.
