Should You Buy Tapestry’s Stock Post Fiscal Q3?
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Tapestry (NYSE: TPR) stock, a luxury goods retailer of handbags, shoes, and accessories under the Coach, Kate Spade, and Stuart Weitzman brands, has increased by almost 13% over the last five trading days (one week) and currently stands at around $32. In comparison, the broader S&P500 index increased only marginally over the same period. The retailer’s stock jumped on beating both top and bottom lines in the recent fiscal third quarter in the face of a high inflationary environment. In Q3, the company’s revenue grew 13% year-over-year (y-o-y) to $1.4 billion and remained flat in adjusted earnings per share to $0.51. The company continued to leverage its digital scale to bring in new customers and develop a sustainable advertising budget during the quarter. It’s worth noting that the company acquired 1.4 million new customers and enjoyed a 13% increase in sales despite slowdowns in Asia.

Tapestry’s fiscal 2022 outlook reflects a $0.25 to $0.30 headwind from incremental Covid-related pressure in China and changes to trade regulations. Despite the outlook of a trimmed profit, the company’s shares bounced on the indication that lockdowns in China could end by June. That said, China’s demand issues are complemented by supply issues such as production delays and inflation-induced price hikes, which reduced margins by 170 basis points from last year in FYQ3. Even so, gross margins for the luxury brand remained extremely high at 69.9%.

We forecast Tapestry’s Revenues to be $6.8 billion for the fiscal year 2022, up 18% y-o-y. Looking at the bottom line, we now forecast earnings per share estimate to come in at $3.47. Given the changes to our revenues and EPS forecast, we have revised Tapestry’s Valuation to $36 per share, based on a $3.47 expected EPS and a 10.5x P/E multiple for the fiscal year 2022. That said, the company’s stock appears cheap at the current price. This implies around a 12% premium to the current market price near $32.

Here you’ll find our previous coverage of TPR stock where you can track our view over time.It is helpful to see how its peers stack up. TPR Peers shows how Tapestry’s stock compares against peers on metrics that matter. You will find other useful comparisons for companies across industries at Peer Comparisons.

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