Jefferies downgrades Tapestry on valuation after stock run

Investing.com -- Jefferies downgraded Tapestry to Hold from Buy, saying most of the near-term upside is reflected in the stock after a strong rally that has pushed valuations well above historical levels.

Stock has gained 31% in last six months. It now trades in the low-20s on a forward P/E basis, compared with a historical average of about 12x and roughly 16x for peers.

In longer-term there is risk of a slowdown driven by higher average unit prices.

Jefferies said potential catalysts include a strong December quarter and a possible repeal of tariffs, but added that its estimates already sit above Street forecasts.

Tough double-digit price comparisons, potential cooling in brand momentum and higher discounting in the U.S., particularly among younger consumers are other risks.

While tariff repeal could add about $0.40 to EPS, Jefferies said the benefit is less incremental for Tapestry given its strong mitigation efforts, higher margins and near-peak valuation.

The firm set a $138 price target, based on 21.5x its FY27 EPS estimate of $6.42.

Ralph Lauren was named it its top pick for 2026 given broad-based momentum, resilient U.S. demand and continued gains in average unit retail.

The brokerage set a $425 price target, based on about 24x FY27 EPS, and said improving luxury demand, balanced regional growth and execution support its outlook.

Jefferies also maintained Buy on PVH Corp (NYSE: PVH) but lowered estimates into the fourth quarter on risks tied to reinvestment, softness in Europe and gross margin pressure from the G-III license transition.

It cut its FY26 EPS estimate to $11.48 from consensus of $11.92 and set an $85 price target, valuing the stock at about 7.5x forward earnings, well below its long-term average.

You May Also Be Interested In