On Monday, TD Cowen demonstrated confidence in Victoria's Secret (NYSE:VSCO) by raising the price target on the company's shares to $45.00 from $35.00, while keeping a Hold rating on the stock.
"As expected, VSCO delivered a solid quarter driven by a combination of improvement at PINK apparel, newness & beauty at VS, and the fashion show, and raised FY24 guide," said TD Cowen in its note to clients.
The company's management has raised the FY24 guidance, anticipating that the brand momentum will carry on into the holiday season. TD Cowen acknowledged the positive developments but remained cautious, noting that the current valuation at approximately 18 times FY2 P/E could limit further multiple expansion.
The analyst highlighted that October stood out as the strongest month of the quarter, largely due to the buzz created by the fashion show. Despite a slight decline in the intimates category, Victoria's Secret's own intimates business showed positive results. The management team's efforts to attract a younger demographic appear to be paying off, with the fashion show playing a significant role in this achievement.
TD Cowen believes that Victoria's Secret's new leadership is creating substantial opportunities for improvement across both the VS and PINK brands. The fresh approach, coupled with engaging marketing strategies, seems to be resonating with customers. The recent success of the company is thought to be largely driven by the fashion show and easier year-over-year comparisons in both the PINK apparel and intimates segments.
The price target increase to $45 is based on an estimated 17 times FY2 P/E and a revised FY25E EPS of $2.66.
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