Ralph Lauren brands look strong, analysts say. Thank you work from home.
has the opportunity to emerge from its pandemic challenges as a potential winner, thanks to the strength of its brand and the composition of its revenues, according to JP Morgan analysts.
JP Morgan upgraded the luxury clothing designer‘s stock on Thursday to Overweight from its previous rating of Neutral. Its price target remained unchanged at $142. In recent trades, Ralph Lauren stock (ticker: RL) rose 3.4% to $117.89. The stock is down less than 1% so far this year, compared to a 6% decline in the
Dow Jones Industrial Average.
With Ralph Lauren at around 25% of its pre-pandemic multiple, analysts see an opportunity to own shares of the luxury brand.
Ralph Lauren could see a multi-year margin profile, midteens, analysts said. In February, the company announced that it expects a fiscal 2022 operating margin of around 13%, compared to 12% to 12.5% expected in November. Overall, the company has an opportunity as sales grow faster than costs thanks to potentially higher margins, analysts noted.
The company’s brand image is also strong, analysts say, as smart casual wear becomes the new normal in the work-from-home environment. The men’s category saw the strongest growth, with the acceleration of new, younger customers gravitating to the brand.
“Overall, our recent work indicates that RL’s portfolio is well positioned for the CEO [Patrice] Louvet’s new ‘hybrid’ blend of consumer demand,” JP Morgan analysts said.
JP Morgan research indicated that the company’s regional revenue mix provides ‘relative’ insulation from geopolitical events and Covid-19 disruptions, with analysts seeing more than 50% of revenue coming from North America .
Other analysts don’t have the same level of optimism for the company. Wedbush analyst Tom Nikic downgraded Ralph Lauren shares on March 7 to Neutral from Outperform, and cut the price target to $127 from $150, citing the company’s dependence on European growth.
Of the 16 analysts covering the stock, seven rate it a Hold, eight rate it a Buy and one say it’s an Overweight.
Write to Logan Moore at [email protected]