Tapestry (TPR), the parent company of Coach, is trading at an attractive level after its fiscal third-quarter earnings report fueled investor concerns about demand in the affordable luxury fashion market. JPMorgan is advising clients to "buy the dip," highlighting the company's potential for growth.
The investment bank maintained an overweight rating on Tapestry, which also owns Kate Spade New York and Stuart Weitzman, and raised its price target to $200 from $190, suggesting more than 50% upside from recent trading levels. Analyst Matthew Boss stated in a note that Tapestry's bottom-line growth is expected to accelerate, with opportunities across revenue, gross margin, operating expenses, and capital allocation, which could drive a return to double-digit compounding total shareholder returns.
Tapestry's stock dropped over 12% on Thursday after the company issued weak guidance alongside its latest financial results. The outlook for revenue growth in the June quarter, in particular, disappointed investors worried about headwinds facing affordable luxury brands. However, JPMorgan remains optimistic, pointing to Coach's successful brand revival over the past few years, which has resonated with Gen-Z shoppers and strengthened the company's balance sheet. Coach reportedly led revenue gains for Tapestry in the third quarter, outperforming its other brands.
JPMorgan's positive stance aligns with the broader Wall Street consensus. Data from LSEG shows that 15 out of 24 analysts covering Tapestry have a buy or strong buy rating on the stock. While Tapestry shares have declined over the past one and three months, they are up more than 32% over the last six months.
