Key Takeaways:
Bank of America upgraded Victoria’s Secret & Co. (NYSE:VSCO) to ‘Buy’ from ‘Neutral’ on Wednesday, setting a new price target of $68 that suggests a potential 31% upside for the specialty retailer.
"We are upgrading the stock to Buy from Neutral as we think VSCO's sales momentum will continue, supporting mid to high-teens EPS growth driven by operating margin expansion from the current 6%," Bank of America analysts said in a note.
The upgrade reflects growing confidence in the company’s turnaround efforts. The bank lifted its price objective to $68 from a previous $58, citing strong growth, improving margins, and a brand repositioning that appears to be resonating with consumers. Shares of Victoria's Secret traded up around $51.73 on the news.
The bank’s positive outlook is rooted in the new management team's "Path to Potential" strategy, which focuses on product innovation, increased marketing, and expansion into beauty and international markets. These initiatives are already showing results, with the core intimates segment returning to growth and the company gaining over one percent of market share in the latest quarter, according to recent performance data.
This momentum was evident in the company's last earnings report, where it posted an adjusted EPS of $2.77, beating consensus estimates of $2.47 on revenue of $2.27 billion. The performance has also caught the attention of prominent investors like David Einhorn's Greenlight Capital, which has held a significant position in the company.
Looking ahead, Bank of America forecasts annual EPS growth between 14% and 18% in the medium term, with revenue expected to climb above $7.3 billion by 2028. Despite a recent recovery, analysts see the stock as an attractive entry point, noting it remains down more than 20% from its year-to-date high.
The upgrade suggests that the operational improvements and brand revitalization at Victoria's Secret are gaining traction. Investors will be watching the company's next earnings release to see if the sales momentum and margin expansion can be sustained.
This article is for informational purposes only and does not constitute investment advice.
