Citi has upgraded Capri Holdings (CPRI) from Neutral to Buy, citing a favorable risk/reward scenario despite recent struggles. The report highlights that the market is undervaluing CPRI's brand portfolio, which includes Michael Kors, Versace, and Jimmy Choo, as if they are on a path to extinction. Citi sees potential for stock appreciation through two main avenues: stabilization of brand performance as management refocuses post-merger block, and potential monetization of one or more brands to reveal their true market value. "We do not believe the brands are dead – just extremely mismanaged," Citi states, emphasizing management's efforts to correct past missteps and introduce new assortments.
Citi has raised its target price for CPRI from $21 to $29, based on improved sales and margins projected for fiscal 2027 and beyond, alongside a roll-forward of their discounted cash flow analysis. The valuation uses a conservative ~5x terminal EBITDA multiple, compared to ~8x for peers like Tapestry, reflecting potential upside if CPRI can turn its brands around. The report also notes that CPRI's enterprise value is significantly lower than comparable companies, suggesting a market disconnect.
Capri Holdings was trading at $22.06, up 2.56% on January 10.