On Monday, CFRA analyst Zachary Warring upgraded Ralph Lauren (NYSE:RL) from “Sell” to “Hold,” while keeping a price target of $219. The upgrade comes as InvestingPro data reveals the company’s strong financial health, with Ralph Lauren trading just below its fair value. The analyst’s decision reflects improved operating margins and valuation, following a recent drop in share prices.
Warring based his analysis on a forward price-to-earnings (P/E) ratio of 17.5 times the expected earnings for fiscal year 2026, which ends in March. He believes the company’s above-average operating margins, driven by operational efficiencies, justify the valuation. Warring kept his earnings per share (EPS) estimates for fiscal years 2025 and 2026 at $11.75 and $12.50, respectively.
The company’s stock has seen a 30% drop in the past two months, mainly due to concerns about tariffs. However, Ralph Lauren maintains a solid 68% gross profit margin and a return on equity of 28%, both of which are above the industry average. Warring notes that Ralph Lauren is in a stronger position to manage these challenges compared to other U.S. retailers, as less than half of its revenue comes from the U.S.
For fiscal year 2025, Warring predicts Ralph Lauren’s operating margin will exceed pre-pandemic levels, reaching 13.8%, driven by cost-cutting measures. The analyst now believes the stock is fairly valued and could trade at 15 to 20 times earnings in the long term if the company can maintain its margins. With a price-to-earnings growth (PEG) ratio of 0.71, the stock appears to be a good investment relative to its growth prospects, according to InvestingPro data.
Other analysts are also showing confidence in Ralph Lauren. UBS reiterated its “Buy” rating and price target of $348, calling the company a high-quality growth stock. Needham analysts initiated coverage with a “Buy” rating and a $310 target, highlighting the company’s consistent strategy and growth in Average Unit Retail (AUR). Wells Fargo upgraded the stock to “Overweight,” setting a price target of $240, citing Ralph Lauren’s strong brand metrics and global reach.
In corporate news, Ralph Lauren also announced changes to executive compensation, including a base salary of at least $1 million and a $2 million annual stock award target for Halide Alagoz, effective from fiscal year 2026. UBS analyst Jay Sole raised the price target to $348, emphasizing the company’s transformational changes and undervaluation at 20 times forecasted earnings.
Overall, these developments reflect growing optimism about Ralph Lauren’s ability to grow and navigate industry challenges. Investors will likely keep a close eye on these changes to assess their impact on the company’s financial outlook.
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