Bath & Body Works share drop presents compelling entry point, says BMO Capital

BMO Capital analyst Simeon Siegel reiterated an Outperform rating and $50 price target on Bath & Body Works, noting that the shares reversed after rising pre-market. The firm believes the dip was primarily driven by disappointing Q2 trends and guidance, implied second half gross margin compression, and tariff status-quo actualizing at bottom half of guidance. Importantly, management suggested 0%-2% Q2 guidance incorporates a one-timeish roughly 1pt headwind with implied domestic performance above the 0%-2% guide, the analyst tells investors in a research note. The firm added that it understands the “why” but believes the share drop represents a particularly compelling entry point as it continues to believe Bath & Body Works is under-earning and undervalued and sees Q1 as a critical return to growth.