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Does Tapestry’s Stock Have More Room For Growth?

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Note: Tapestry’s FY’22 ended on July 2, 2022.

After a 42% growth over the last six months, at the current price of around $41 per share, we believe Tapestry (NYSE: TPR), a luxury goods retailer of handbags, shoes, and accessories under the Coach, Kate Spade, and Stuart Weitzman brands – could see modest growth. TPR stock has increased from around $29 to $41 in the last six months, compared to an 8% rise in the S&P index. The company’s stock has bounced back as of late after the company reported impressive earning results during this period – despite the increase in transportation costs and higher inflationary pressures. Also, Coach has a more significant physical presence in China, which is expected to be the key beneficiary of China’s reopening. China’s luxury market is rapidly recovering from the pandemic with greater strength and resilience. It is expected to reach around $112 billion by 2025, or approximately 25% of the total global spending.

In the fiscal first half of 2023, TPR reported sales of $3.5 billion, down 2% year-over-year (y-o-y). Sales in Japan and Europe were cited as particularly strong in the holiday quarter, helping to offset weakness in China. In addition, earnings of $2.14 per share were up 10% y-o-y during the first six months of the year. For the full-year 2023, Tapestry now expects $6.6 billion in revenue, up from a prior $6.5 billion to $6.6 billion guidance and in line with the analyst consensus. Earnings per diluted share are now expected to range from $3.70 to $3.75, up from a $3.60 to $3.70 guidance offered previously.

We forecast Tapestry’s Revenues to be $6.6 billion for the fiscal year 2023, marginally down y-o-y. Looking at the bottom line, we now forecast EPS estimates to come in at $3.76. Given the changes to our revenues and EPS forecast, we have revised Tapestry’s Valuation to $44 per share, based on a $3.76 expected EPS and an 11.8x P/E multiple for the fiscal year 2023. That said, the company’s stock appears modestly cheap at the current price.

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Source: Fox Business

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