Citi upgrades Lojas Renner SA stock, cites promising recovery prospects By Investing.com

On Thursday, Citi upgraded stock of Brazilian retailer Lojas Renner SA from Neutral to Buy, adjusting the price target to R$18.00 from a previous R$18.40. The revision follows a significant dip in the company’s share value post its first-quarter results for 2024.

Lojas Renner, which trades under the ticker LREN3:BZ on the B3 exchange and OTC as LRENY, has experienced a decline of over 20% since the announcement of its first-quarter earnings.

Citi attributes this downturn to several factors, including the recent floods in Rio Grande do Sul, the retailer’s home state, and unfavorable weather conditions which impacted the launch of their winter collection.

Despite these setbacks, Citi believes that the current stock price has accounted for these challenges. The firm suggests that Lojas Renner is on the cusp of a rebound, propelled by an anticipated improvement in Brazil’s credit cycle and the resumption of credit concession by Realize, a financial services arm of the retailer.

Citi’s revised price target reflects an expected total earnings return of 44%. The firm’s outlook is based on the stock’s potential to trade at 13 times its 2025 earnings per share, which is deemed attractive compared to the current valuation of 10 times P/E for the year 2025.

The upgrade and new price target suggest confidence in the retailer’s recovery prospects despite a difficult second quarter anticipated for 2024.

In other recent news, Lojas Renner has maintained an Outperform rating from Itau BBA, with a price target of R$20.00. The firm anticipates a strong consumption rebound in 2024, which positions Lojas Renner favorably in the mid-income retail sector due to its high liquidity and quality.

The firm’s positive outlook is driven by factors such as the gradual rollout of a new distribution center and improving trends for Realize, Lojas Renner’s financial services arm. These developments are expected to enhance profitability and potential productivity gains.

Itau BBA’s analysis suggests that Lojas Renner is trading at an attractive valuation, with a price-to-earnings (P/E) ratio of 11.9 times for the year 2025, the best within the apparel mid-income sector.

The firm’s endorsement of Lojas Renner is based on the retailer’s strategic initiatives and market positioning. These recent developments and the company’s ability to leverage its high liquidity and quality offerings are expected to play a critical role in its performance in the coming year.

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