On Monday, Coty Inc . (NYSE:COTY) experienced a revision in its stock outlook as DA Davidson adjusted the company's price target. The new target is set at $14.50, a decrease from the previous $17.00, while the firm continues to endorse a Buy rating on the shares.
The adjustment follows Coty's pre-announcement of its first-quarter fiscal year 2025 organic sales growth, which is expected to be between 4% and 5% year-over-year, marginally missing the projected 6%.
The company's EBITDA (earnings before interest, taxes, depreciation, and amortization) is anticipated to be flat or potentially decline, contradicting earlier estimates of a 7% year-over-year increase. Despite the slower growth, Coty is ramping up its cost-saving measures and maintains its forecast for fiscal year 2025 EBITDA growth of 9% to 11%.
Recent trends have shown a deceleration in category growth within the U.S. market, and retailers are reportedly reducing inventory levels not just domestically, but also in Australia, China, and Asian travel retail sectors.
In response to these developments, DA Davidson has also revised Coty's organic sales growth predictions for the second quarter of fiscal year 2025 to 2% year-over-year, and 4% for the full fiscal year, down from the previously estimated 7%.
The reduced growth expectations have led to a lowering of the target multiple from 13.5x to 12.0x. This revision is based on a 12.0x multiple of the projected calendar year 2025 EBITDA, which has been adjusted down to $1,250 million from the earlier forecast of $1,265 million.
In other recent news, Coty Inc. reported a like-for-like sales growth of 4-5% for the first quarter of fiscal year 2025, falling short of the estimated 6%. The company's EBITDA for the same period is expected to remain flat or slightly lower year-over-year. Despite these figures, Coty maintains its full-year adjusted EBITDA growth projections at 9%-11%.
Analyst firms such as Jefferies, and Deutsche Bank have adjusted their price targets for Coty, while maintaining positive ratings. Stifel, on the other hand, has reduced its price target while holding its rating. In addition, Coty has formed its first Scientific Advisory Board to guide skincare research and development.
RBC Capital has maintained an Outperform rating on Coty shares, citing the company's strong presence in the rapidly expanding fragrance market. These are the recent developments for Coty Inc.
InvestingPro Insights
Recent data from InvestingPro sheds additional light on Coty's financial situation, providing context to the revised outlook from DA Davidson. Despite the lowered price target, Coty's revenue growth remains positive, with a 10.15% increase in the last twelve months as of Q4 2024. This growth, albeit slower than initially projected, aligns with the company's pre-announcement of 4-5% organic sales growth for Q1 FY2025.
InvestingPro Tips highlight that Coty boasts impressive gross profit margins, which is reflected in the data showing a robust 64.39% gross profit margin for the last twelve months. This strong margin could provide some cushion as the company navigates the challenging market conditions and implements cost-saving measures.
However, investors should note that Coty's stock has taken a significant hit recently, with a 16.03% decline in the past week and a 22.69% drop over the last three months. This decline is consistent with the revised outlook and slower growth expectations mentioned in the article.
For those seeking a more comprehensive analysis, InvestingPro offers 11 additional tips for Coty, providing a deeper understanding of the company's financial health and market position.
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