The Institutions Like The Price Of Victoria’s Secret & Co
Between the two of them, the analysts and the institutions have put a floor in shares of Victoria’s Secret & Co (NYSE: VSCO). While the Insidertrades.com consensus price target is falling and the institutional activity slacking both are bullish and the outlook is positive. On the analysis end, we’ve seen 2 commentaries in the wake of the Q1 results from a possible 10 covering the stock and both lowered their price target. The takeaway is the rating is a firm Buy and holding steady while the two new price targets are just below the broad consensus and roughly 60% above the current price action. Even the new low price target, set by JPMorgan Chase, is still 30% above the broad consensus and we think it undervalues the name.
Trading at only 6X its earnings the stock is a deep-value relative to other successful mall-based brand names. Ralph Lauren is trading at double that amount while Ulta Beauty trades at more than 3X the amount. This, we think, is one of the reasons the institutions are so interested and their activity is telling. While the net of activity has fallen on a quarter-to-quarter basis the institutions have been net buyers for all three-quarters of the company’s independently-traded life and they hold nearly 100% of the stock. By itself, the institutional ownership suggests a bottom at the current price level, add in the 7% short-interest and we see not only a bottom but the chance for a reversal that could results in a price-multiple expansion as well.
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Victoria’s Secret Pops On Bottom Line Strength
Victoria’s Secret had a good quarter despite some expected supply chain and inflation-related challenges. The company reported $1.48 billion in net revenue or a decline of 4.5% versus last year but this figure is at the high end of the guidance and beat the consensus by 70 basis points. To put things into perspective, the revenue decline is on top of last year’s pandemically boosted quarter and estimated flat on an adjusted basis. Moving down to the margin, the news is more mixed but still very bullish.
The company experienced a sharp almost 50% decline in operating income due to inflation and deleverage related to last year’s sales strength. The good news is that margin came in well above expectations and resulted in an adjusted EPS of $1.11. The $1.11 is not only a dime above the guidance range but beat the consensus by more than $0.25 and the guidance is good as well. The company is expecting revenue to be flat relative to last year with EPS in a range of $0.95 to $1.25, both of which are above the consensus figures and we see upside risk in the numbers.
The company recently announced the launch of a new eCommerce platform called the VS&Co-Lab. The lab will be a feature on the website that showcases brands that line up with the company’s values. The lab is intended to help drive sales and attract new customers by deepening penetration and expanding product categories.
The Technical Outlook: Victoria's Secret Confirms The Institutional Bottom
Price action in VSCO jumped 10% in early premarket action and opened the day with a gap up. The gap is so far holding and confirms strong support at what we view as the institutional bottom. The price action is capped at the short-term moving average now but we do not see it lasting long. A move above the short-term EMA would be bullish and could take the stock up to $52 in the near term. Longer-term, shares of this stock are deeply undervalued and will likely trend higher to a valuation more in-line with peers.
Companies in This Article:
| Company | Current Price | Price Change | Dividend Yield | P/E Ratio | Consensus Rating | Consensus Price Target |
|---|
| Victoria's Secret & Co. (VSCO) | $37.09 | +6.1% | N/A | 21.56 | Hold | $26.30 |
Experience
Thomas Hughes has been a contributing writer for InsiderTrades.com since 2019.
Areas of Expertise
Technical analysis, the S&P 500; retail, consumer, consumer staples, dividends, high-yield, small caps, technology, economic data, oil, cryptocurrencies
Education
Associate of Arts in Culinary Technology
Past Experience
Market watcher, trader and investor for numerous websites. Founded Passive Market Intelligence LLC to provide market research insights.
