Wells Fargo raises Victoria’s Secret shares target on positive trends By Investing.com

Wells Fargo has adjusted its outlook on Victoria’s Secret (NYSE: VSCO), increasing the price target to $30.00 from the previous $28.00, while retaining an Overweight rating on the stock.

The adjustment reflects a positive shift in the company’s recent performance, with the analyst noting a marked improvement in trends.

The report highlighted that customer demand grew in July and saw even greater growth in August, driven by the success of the PINK brand’s back-to-school season.

The analyst pointed out that Victoria’s Secret’s recent product innovations and marketing strategies are resonating with consumers. New launches like the Featherweight Max and Dream Collection, along with the PINK Friday event, have been particularly effective in attracting customer interest. These initiatives are part of the reason behind the company’s momentum.

Despite the challenging macroeconomic environment and the need for promotional activities, Victoria’s Secret has been experiencing a better return on investment from its strategic pricing decisions. The company’s ability to adapt its pricing strategies effectively has been beneficial.

Encouragingly, the momentum that Victoria’s Secret has been experiencing led to an upward revision of its full-year plan. The report suggests that the company’s overall narrative is on an improving trajectory, indicating a more optimistic outlook for the lingerie retailer’s future performance.

In other recent news, Victoria’s reported a successful second quarter, with earnings per share of $0.40, surpassing analyst estimates of $0.35. The company’s revenue was $1.42 billion, slightly above the consensus of $1.41 billion.

The company has also raised its fiscal 2024 outlook, now forecasting net sales to be down approximately 1% compared to the previous guidance of a low-single-digit decline.

Victoria’s Secret’s Interim CEO and CFO Timothy Johnson noted a “continued sequential improvement in quarterly sales results in North America for the fourth consecutive quarter.” The company projects net sales to increase in the low-single digits in the third quarter compared to $1.265 billion in the same period last year.

Analysts expect the company’s adjusted operating loss to be between $40 million and $60 million, with earnings per share between -$0.80 and -$0.60, compared to analyst estimates of -$0.68. Johnson also highlighted positive customer response to new products and high-single-digit sales growth in the company’s International business and Adore Me segment.

InvestingPro Insights

Following Wells Fargo’s upgraded outlook on Victoria’s Secret, real-time data and insights from InvestingPro further enrich the narrative around the company’s stock performance. According to InvestingPro Tips, analysts have revised their earnings upwards for the upcoming period, indicating a bullish sentiment on the company’s financial prospects. Additionally, while the stock has shown strong returns over the last month and three months, with a one-month price total return of 37.69% and a three-month return of 18.48%, the RSI suggests the stock is currently in overbought territory, which could be a signal to investors to monitor the stock closely for any potential pullbacks.

The financial metrics from InvestingPro reveal a P/E ratio of 13.5, which suggests that the stock may be reasonably valued compared to earnings. However, the adjusted P/E ratio for the last twelve months as of Q1 2025 stands at 19.61, indicating a higher valuation when certain adjustments are made. The Price / Book ratio for the same period is 4.61, which can be considered high, reflecting that the market values the company’s assets at a premium. Despite a slight revenue decline of 2.12% in the last twelve months as of Q1 2025, the company’s gross profit margin remains strong at 44.47%, highlighting efficient cost management.

For investors seeking more detailed analysis and additional insights, there are 8 more InvestingPro Tips available for Victoria’s Secret at https://www.investing.com/pro/VSCO, providing a comprehensive outlook on the stock’s potential and performance.

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