Monday, Canaccord Genuity initiated coverage on shares of Coty Inc . (NYSE:COTY), a global beauty company, with a Buy rating and a price target set at $14.00. The firm highlighted Coty's historical role in making fragrances more accessible since its inception in 1904 and its current status as one of the largest beauty conglomerates with a focus on prestige fragrance.
The company, known for owning well-known brands such as CoverGirl and Sally Hansen, has been successful in licensing luxury brands and developing their fragrance and beauty offerings.
Coty's major partnerships include names like Burberry, Gucci, Hugo Boss, and Calvin Klein. The firm noted that Coty's management is now aiming to expand into prestige cosmetics and skincare to complement their fragrance business.
Canaccord Genuity expressed confidence in Coty's ability to outpace the total market growth, citing the company's investment in fast-growing beauty categories and the potential for long-term growth through various strategies.
The analyst pointed out that Coty is currently trading at approximately 19 times the Street's fiscal year 2 estimates, which is below the historical average of 22 to 24 times and significantly lower than conglomerate peers Estée Lauder (EL) and L'Oréal (OR), which trade at around 33 times and 29 times, respectively.
Despite concerns about a slowdown in the U.S. beauty market, Canaccord Genuity believes Coty is well-positioned to outperform, supported by significant whitespace growth opportunities, exposure to high-growth global beauty markets, and strong branding that keeps consumers engaged.
InvestingPro Insights
As we delve deeper into Coty Inc.'s (NYSE:COTY) financial landscape, InvestingPro data reveals a market capitalization of $9.41 billion, underscoring the company's substantial presence in the beauty industry. Coty's Price-to-Earnings (P/E) ratio stands at 28.93, indicating the market's valuation of the company relative to its earnings. Notably, Coty's Gross Profit Margin over the last twelve months as of Q2 2024 is an impressive 63.67%, reflecting its strong ability to control costs and maintain profitability in its operations.
Among the InvestingPro Tips, two particularly stand out in relation to the article. First, Coty's trading at a low P/E ratio relative to near-term earnings growth suggests that the company may be undervalued considering its growth prospects. Second, analysts predict that the company will be profitable this year, aligning with Canaccord Genuity's positive outlook and supporting the notion of Coty's potential to outperform in the market.
For investors seeking a more comprehensive analysis, there are additional InvestingPro Tips available at https://www.investing.com/pro/COTY, providing deeper insights into Coty's financial health and market position. To enhance your investing experience, use coupon code PRONEWS24 to receive an additional 10% off a yearly or biyearly Pro and Pro+ subscription at InvestingPro, where you can find a total of 7 insightful tips for Coty Inc.
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