Victoria’s Secret gets UBS upgrade as turnaround gains traction

Investing.com -- Victoria’s Secret & Co has been upgraded to "neutral" from "sell" by UBS, reflecting growing confidence in the retailer’s turnaround under its new CEO. The investment bank also raised its price target for the stock to $47, up from $18, citing improved performance and long-term growth potential.

The company’s North American sales showed signs of recovery in the third quarter, rising 3% year-on-year after a 3% decline in the previous quarter. This outpaced the broader intimate apparel market, which saw a slight drop, suggesting that Victoria’s Secret is regaining market share, UBS noted.

UBS highlighted the company’s strategic focus on innovative products and differentiation, projecting steady mid-single-digit sales growth through 2025. Strong third-quarter results and an optimistic holiday outlook prompted the bank to increase its earnings forecasts for 2024-2026 by 15-20%.

However, the report also warned of challenges ahead, including potential sales slowdowns after the holiday season and growing competition from emerging brands and discount retailers, which could pressure both sales and profit margins.

UBS’s new $47 price target is based on a price-to-earnings multiple of 15 times its 2026 earnings forecast of $3.05 per share, reflecting reduced risk and an improving economic environment.

Earlier, Wells Fargo downgraded the stock to "equal weight" from "overweight," citing limited upside following a sharp rally this year. While Wells Fargo acknowledged the progress under new CEO Hillary Super, including product revamps and rebranding efforts, it flagged challenges in sustaining margin improvements. 

Source: Investing.com