Positive Outlook for Coty: M&A Potential and Undervalued Stock Support Buy Rating

Analyst Filippo Falorni of Citi reiterated a Buy rating on Coty (COTY – Research Report), retaining the price target of $6.50.

Filippo Falorni has given his Buy rating due to a combination of factors that suggest a positive outlook for Coty’s stock. One of the key reasons is the potential for mergers and acquisitions, as Coty is reportedly in early discussions to sell parts of its Prestige and Consumer Beauty businesses. This potential sale could unlock significant value, especially considering Coty’s progress in reducing its debt and the possibility of monetizing its stake in Wella.
Additionally, Falorni finds Coty’s current valuation compelling. The stock is trading at relatively low multiples compared to its estimated earnings and enterprise value, which suggests that the market may be undervaluing the company. When evaluating Coty using a sum-of-the-parts approach, Falorni arrives at a higher implied share price, indicating potential upside. Despite some uncertainties regarding EBITDA figures, the overall assessment points to a favorable risk-reward scenario, supporting the Buy rating.

Falorni covers the Consumer Defensive sector, focusing on stocks such as Monster Beverage, Brown-Forman B, and Boston Beer. According to TipRanks, Falorni has an average return of -1.8% and a 52.34% success rate on recommended stocks.

In another report released today, Evercore ISI also maintained a Buy rating on the stock with a $10.00 price target.