UBS raises Bath & Body Works stock PT to $52 despite sales growth concerns By Investing.com


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On Monday, UBS maintained a Neutral rating on Bath & Body Works Inc. (NYSE: BBWI) but increased the price target to $52.00 from $46.00. The revision reflects a shift in the firm’s long-term forecast for the company, with a noted decrease in confidence due to slower-than-expected normalization of sales growth post-COVID. The firm expressed concern over the company’s guidance suggesting that sales growth would turn positive in the second half of the year, adding an element of risk.

The company’s guidance for the fiscal year 2024 forecasts earnings per share (EPS) between $3.00 and $3.35. However, investor conversations suggest that the buy-side anticipates a higher EPS range of $3.50 to $3.80.

“Interestingly, our conversations with investors indicate most think BBWI™s FY24 EPS guidance is beatable”, USB said.

UBS indicated that even if Bath & Body Works’ sales growth rate improves in the second half of the year, it may not significantly impact the stock price, as the market has already factored in these expectations.

The new price target is based on 12 times the firm’s estimated $4.35 EPS for fiscal year 2026, marking a 10% increase in the EPS base and adjusting the valuation to the new fiscal year. The slight adjustment in the price-to-earnings (P/E) ratio used accounts for the rest of the price target change. UBS’s valuation multiples analysis suggests that a $52 price target aligns Bath & Body Works’ valuation with its peers in terms of P/E, price-to-sales, and free cash flow yield.

Additionally, UBS’s discounted cash flow (DCF) analysis corroborates the $52 valuation. The firm’s analysis indicates that the company’s stock price is in line with industry standards when considering various financial metrics. The price target increase reflects a comprehensive review of the company’s financial outlook and its position relative to competitors in the market.

InvestingPro Insights

Bath & Body Works Inc. (NYSE: BBWI) has been navigating a challenging retail environment post-COVID, with UBS maintaining a Neutral rating while adjusting their price target. Looking at the real-time data from InvestingPro, the company’s market capitalization stands at $10.48 billion, with a P/E ratio of 11.91, reflecting a valuation that is attractive relative to near-term earnings growth. This aligns with one of the InvestingPro Tips, which highlights that BBWI is trading at a low P/E ratio in relation to its earnings growth potential.

Investors considering Bath & Body Works’ stock should note the company’s robust gross profit margin of 43.56% over the last twelve months as of Q4 2024, which may be indicative of efficient operations and strong pricing power. Additionally, BBWI has shown a strong return over the last three months, with a price total return of 24.33%, signaling investor confidence in the company’s performance.

For those looking to delve deeper into investment analysis, InvestingPro offers more tips, including the fact that BBWI has maintained dividend payments for 52 consecutive years, which could be a testament to the company’s commitment to shareholder returns. With 13 analysts having revised their earnings downwards for the upcoming period, it’s crucial to stay informed on the latest expert insights. To access further analysis and tips, including the company’s liquidity and profitability predictions, visit InvestingPro and consider using the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription. There are 6 additional InvestingPro Tips available for BBWI that can provide a more comprehensive understanding of the company’s financial health and market position.

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