Fashion Giant Capri’s Shares Jump 7.2% on Profit Beat; Target Price $58 in Best Case

The global fashion luxury group Capri Holdings reported better-than-expected profit in the fiscal third quarter and said it registered double-digit sales growth in China during the holiday season, sending its shares as high as 7.2% on Wednesday.

Capri said its net attributable profit of $179 million, or $1.18 per share, down from $210 million, or $1.38 per share, a year earlier. Adjusted earnings per share of $1.65 per share, beating the Wall Street estimate of $0.97 per share.

However, the company’s total revenue fell 17% to $1.30 billion. That missed the market expectations of $1.33 billion.

“Given the trajectory, Capri Holdings (CPRI) is on, we believe CPRI will handily surpass pre-pandemic levels of profitability as investments in Versace and Choo are largely behind the company, and active measures to improve margins at Kors are already taking form. We reiterate our BUY rating and $72 price target and will update our estimates pending the outcome of today’s conference call,” said Camilo Lyon, equity analyst at BTIG.

Following this upbeat result, Capri shares gained as high as 7.2% to $45.83 on Wednesday; the stock rose over 10% in 2020.

Capri Stock Price Forecast

Seventeen analysts who offered stock ratings for Capri in the last three months forecast the average price in 12 months at $46.07 with a high forecast of $58.00 and a low forecast of $27.00.

The average price target represents a 7.36% increase from the last price of $42.91. From those 17 analysts, 12 rated “Buy”, five rated “Hold”, and none rate “Sell”, according to Tipranks.

Morgan Stanley gave a base target price of $46 with a high of $70 under a bull scenario and $18 under the worst-case scenario. The firm currently has an “Overweight” rating on the fashion holding company’s stock.

Several other analysts have also recently commented on the stock. Capri had its price objective lifted by Telsey Advisory Group to $46 from $28. Telsey Advisory Group currently has a market perform rating on the stock. Deutsche Bank raised to a buy rating from hold and increased their target price to $56 from $28. BTIG Research raised to a buy rating from a neutral and set a $72 price objective.

In addition, Piper Sandler upgraded to an overweight rating from a neutral and boosted their price target to $56 from $26. Robert W. Baird upgraded to an outperform rating from a neutral and boosted their price target to $58 from $48.

Analyst Comments

“Global retail sales improvement in the Sept-20 quarter improves visibility on the luxury accessories trajectory post-Covid-19: 1) Retail fleet optimization supports a return to at least a 20%+ Michael Kors brand EBIT margin medium term; 2) Accessories progress underpins our +10% 5-year revenue CAGR and 13.5% FY23 operating margin forecast at Versace; and 3) Our Base Case contemplates Nov-23 term loan paydown. Valuation remains attractive at 10x FY23e EPS,” said Kimberly Greenberger, equity analyst at Morgan Stanley.

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