Coty’s Stock Revised Lower Following Earnings Report, Price Targets Hold Some Upside

Coty Inc. (NYSE: COTY) is under scrutiny as analysts revise their outlook on the company following its fiscal fourth-quarter earnings release. Several firms have downgraded the stock or lowered price targets, reflecting concerns about the company's near-term prospects and market conditions.

Coty's stock currently trades at $3.88 in the pre-market as the open looms, representing a drop of 20% from the previous day's close. 

Evercore ISI analyst Robert Ottenstein lowered the firm's price target on Coty to $7 from $10, while maintaining an ‘Outperform' rating. While Q4 results aligned with expectations, Ottenstein noted a challenging outlook. The analyst highlighted the anticipated continuation of destocking by U.S. retailers into fiscal year 2026, which could restrain Coty's stock appreciation. Despite these headwinds, Evercore ISI suggests that the stock remains undervalued when assessed on a sum-of-the-parts basis.

Adding to the negative sentiment, Deutsche Bank reduced its price target on Coty to $4 from $6, maintaining a ‘Hold' rating. Citi also downgraded Coty to ‘Neutral' from ‘Buy,' lowering the price target to $4.25 from $6.50. Citi's rationale included weaker-than-expected fiscal Q4 results, even when considering modest expectations. The firm anticipates that the challenges will persist for at least two more quarters. The potential sale of the Wella stake was also cited as a contributing factor to the downgrade.

The analyst revisions reflect a combination of factors, including concerns about Coty's short-term financial performance, the broader macroeconomic environment, and specific company-related events. The anticipated destocking by U.S. retailers is a significant headwind, as it could reduce demand for Coty's products in a key market.

Circana data indicates that Coty is outperforming competitors like LVMH and Interparfums, which offers a contrasting view of the company's competitive positioning. However, the overall market sentiment appears to be weighing more heavily on the stock's performance.

The potential sale of the Wella stake is another factor influencing analyst opinions. While the sale could generate capital for Coty, it also raises questions about the company's long-term strategy and its commitment to certain business segments.