DJ L Brands Stock Jumps After Yet Another Upgrade. Why Some Analysts Say 'There Is Change Afoot.' -- Barrons.com
By Ben Walsh
For the second time this week, L Brands stock is rising thanks to an analyst upgrade.
Barclays' Adrienne Yih raised her rating on the struggling retailer's stock two notches straight to Overweight from Underweight in a note to clients Thursday.
L Brands stock (ticker: LB) rose 3.7% in Thursday trading in response. The stock has dropped 24% over the past 12 months, compared with a 26% gain for the S&P 500.
Earlier this week, L Brands rose after KeyBanc Capital Markets analyst Edward Yruma upgraded the stock to Overweight from Sector Weight on Tuesday. Yruma reasoned that the stock wasn't fully pricing in what he sees as the likely spinout of the poorly performing Victoria's Secret brand. That move, he argued, would unlock the value of the relatively better performing Bath & Body Works.
Barclays' Yih also thinks "there is change afoot." She writes: "There is meaningful upside to [L Brands] shares if either management or the activist announce measures to improve the business and unlock inherent asset value." Options that Yih thinks are realistic include monetizing real estate, cutting inventory or costs, repositioning their brands and, separating Victoria's Secret and Bath & Body Works.
Like Yruma, Yih points out that Victoria's Secret's recent poor run will be an increasingly strong impetus for management to make some sort of a strategic move, especially "while Bath & Body Works has maintained peak operating margins north of 20%".
The bottom line, Yih reasons, "is the status quo is not an option...we believe value-enhancing strategies could come soon."
Write to Ben Walsh at ben.walsh@barrons.com
(END) Dow Jones Newswires
January 23, 2020 12:20 ET (17:20 GMT)
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