Capri Holdings Ltd (NYSE:CPRI) received an upgrade from BMO Capital Markets, with analyst Simeon Siegel raising the stock to Outperform and increasing the price target from $25 to $31, citing opportunities to improve sentiment, margins, and debt management.
While sentiment for the stock has turned "too negative," the pressure on the company's sales, margins, and debt may turn "less bad," according to Siegel.
The Capri Holdings Thesis: There are no signs of strength or inflection, but negative sentiment offers "downside protection," Siegel said in the upgrade note.
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With "forgotten" stocks, a change in sentiment takes place before a change in fundamentals, the analyst stated. He added that there are "three ways to win" with Capri Holdings:
- Sales are low: The recent decline in the company's revenues "appears more a function of distraction/lack of effort post-transaction announcement than of an overstretched logo," the analyst wrote. It needs to address its inventory gluts, which could "prove a powerful opportunity," he added.
- Margins are low: The company has the potential to improve margins, Siegel said.
- Debt Is High: The analyst suggested this could be one of the earliest and most underappreciated upside opportunities, as reducing the Market Cap-to-Enterprise Value gap through asset sales or improved cash flow could significantly benefit shares.
CPRI Price Action: Shares of Capri Holdings were up 7.29% to $21.78 at the time of publication Monday.
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