On Thursday, TD Cowen showed a positive stance on Bath & Body Works Inc. (NYSE: NYSE:BBWI), raising the price target on the company's stock to $48.00 from $42.00, while maintaining a Buy rating. The firm has also highlighted Bath & Body Works as the Best Idea for the year 2025.
The upgrade reflects the analyst's confidence in the company's financial health and growth prospects. The analyst noted that Bath & Body Works continues to be an "underappreciated story" despite demonstrating strong operating margins in the high teens and a robust free cash flow (FCF) profile, which is approximately 10% of sales. The company's agile supply chain was also mentioned as a key strength.
Looking ahead to the fiscal year 2025, TD Cowen anticipates that new product introductions, expansion into new market segments, and improved marketing efforts will contribute to Bath & Body Works' growth. The firm has modeled a fiscal year 2025 earnings per share (EPS) of $3.65, which is slightly above the Street's consensus of $3.60.
The analyst further commented on the valuation of Bath & Body Works, describing it as inexpensive and suggesting that there is potential for valuation expansion as the company executes its strategic initiatives. This optimistic outlook is based on the firm's analysis and projections for the retailer's performance in the coming years.
Bath & Body Works' recognition as the Best Idea for 2025 by TD Cowen underscores the firm's belief in the company's ability to outperform in the market and deliver value to shareholders through its strategic plans and operational efficiency.
In other recent news, Bath & Body Works has demonstrated robust financial performance, with third-quarter sales increasing by 3% to $1.6 billion and earnings per share reaching $0.49.
This strong performance led to the company revising its full-year financial guidance upwards. Analyst firms, including TD Cowen, BMO Capital, Telsey Advisory Group, Citi, and Morgan Stanley (NYSE:MS), have responded positively to these developments.
TD Cowen maintained a Buy rating on Bath & Body Works, raising its price target from $40 to $42, highlighting the company's growth strategy and strong domestic sourcing. BMO Capital also retained an Outperform rating, with a steady price target of $50, citing the company's ability to surpass earnings expectations.
Telsey Advisory Group increased its stock price target to $43, attributing this to strong sales growth and controlled expenses. Citi maintained a Neutral rating but raised its price target from $35 to $40. Morgan Stanley continued its Overweight rating, raising its price target to $49.
Despite facing challenges from the Middle East conflict, Bath & Body Works is preparing for a strong Q4 holiday season and expects to generate significant adjusted free cash flow. The company's loyalty program has gained momentum, reaching 38 million active members. Furthermore, the company's expanding product range has been well-received by customers, contributing to its growth.
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