Please ensure Javascript is enabled for purposes of website accessibility

Why Tapestry Is Up 9% Today

By Howard Smith – Sep 16, 2020 at 12:50PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

A Deutsche Bank analyst sees several catalysts for upside.

What happened

Tapestry (TPR 2.11%), 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. 

Howard Smith has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Tapestry. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Tapestry Stock Quote
Tapestry
TPR
$37.25 (2.11%) $0.77

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
351%
 
S&P 500 Returns
115%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 11/29/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.