On Thursday, Jefferies adjusted its stance on Tapestry Inc. (NYSE:TPR), the parent company of Coach , by downgrading the stock from Buy to Hold. The firm also set a price target of $50.00 for Tapestry shares.
This decision comes as the stock has seen a significant increase, rising 30% year-to-date, which has led to the valuation fully reflecting the risk/reward profile of the combined company. The completion of the company's consolidation is anticipated within the current calendar year.
The downgrade reflects a cautious outlook on the luxury fashion company's prospects. Despite Coach's strong performance and share momentum, Jefferies expressed uncertainty regarding whether the brand's popularity and management's execution could counterbalance the challenges faced by other brands under Tapestry's umbrella, particularly Michael Kors. Concerns were also raised about the risks associated with integrating these brands.
Jefferies highlighted that Tapestry's narrative is likely to shift towards a turnaround strategy, given the company's high leverage. This could imply a period of restructuring and efforts to improve the performance of the company's various brands, including the challenged ones.
Tapestry Inc., which also owns Kate Spade, has been working on a multi-brand strategy, aiming to leverage the strength of its individual brands to improve overall performance. However, the integration of these brands poses risks that investors need to consider, as indicated by the updated price target and stock rating.
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