L Brands Has Value Without Victoria's Secret Deal, BMO Says In Upgrade
Shares of L Brands Inc (NYSE: LB) Monday tumbled in after-hours trading on news of Sycamore Partners LLC terminating its agreement to acquire a majority stake in Victoria’s Secret.
Once the noise related to the deal dies down, the focus will be on the company’s underlying fundamental value, according to BMO Capital Markets.
The L Brands Analyst
Simeon Siegel upgraded the rating for L Brands from Market Perform to Outperform with a $17 price target.
The L Brands Thesis
Although Victoria’s Secret generates massive revenue for L Brands, the troubled lingerie brand is likely losing money, Siegel said in the Tuesday upgrade note. (See his track record here.)
The COVID-19 crisis has led to a revenue decline at Victoria’s Secret, which may be a positive, giving management “a very unique opportunity to re-evaluate all aspects of the brand,” the analyst said. This may help the brand become smaller, yet healthier, he said.
L Brands seems to be preparing Victoria’s Secret to operate as a standalone entity, and the brand is likely to carry positive value, Siegel said.
Referring to Bath & Body Works, the analyst said that there is no reason to expect sales growth to taper off after the COVID-19 crisis is over. Even assuming lower margins than the 20% range still suggests an acceleration in sales growth from current levels, he said.
LB Price Action
L Brands shares were down 2.41% at $11.76 at the time of publication Tuesday.
Related Links:
L Brands Closer To Victoria's Secret Sale, CNBC Says; Link Calls Brand 'Mismanaged'
L Brands Option Trading Extremely Bearish Following Victoria's Secret Buyout Reports
Photo by Samantha Marx via Wikimedia.
Latest Ratings for LB
May 2020 | Deutsche Bank | Reiterates | Buy | |
May 2020 | BMO Capital | Upgrades | Market Perform | Outperform |
Apr 2020 | UBS | Maintains | Neutral |
View More Analyst Ratings for LB
View the Latest Analyst Ratings
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