What happened

Tapestry (NYSE:TPR), parent company of the Coach and Kate Spade luxury brands, saw its share price jump almost 10% today as of 12:40 p.m. EDT, after an analyst at Deutsche Bank laid out several positive developments. 

So what

DB analyst Paul Trussell upgraded his rating on Tapestry from hold to buy, and moved his price target up from $18 to $21, representing 25% upside from yesterday's closing share price. 

luxury handbags on display

Image source: Getty Images.

When Tapestry reported fiscal fourth-quarter earnings last month, it reported a 53% drop in sales, but said it exceeded its internal estimates. It said digital sales jumped triple digits versus the previous-year period. The retailer has an "Acceleration Program" ongoing, geared toward focusing more on the consumer, utilizing data to drive its e-commerce growth, and working internally to become more nimble and responsive. 

Now what

Trussell said he believes these efforts are paying off and will result in better margins for fiscal years 2021 and 2022. The improvement program has reduced expenses by $300 million in fiscal 2020, Tapestry said in its earnings release, and the company expects another $200 in cost savings for fiscal 2021.

Trussell also said he believes the valuation of the company is poised to move more in line with specialty retail and footwear peers. He said revised earnings-per-share estimates, along with increasing revenue, will allow the company's price-to-earnings ratio to grow more in line with peers from its March lows, resulting in approximately 25% upside in the share price from yesterday's close.