What Happened?
Shares of beauty products company Coty (NYSE: COTY) fell 4.6% in the afternoon session after Berenberg downgraded the stock to Hold from Buy, citing concerns about a delayed sales growth recovery. The investment firm also significantly cut its price target on the shares to $5.05 from $6.50. Berenberg's decision follows a period of underperformance for the stock and weaker-than-expected sales growth. The firm pointed to a weaker consumer outlook, inventory destocking, and potential headwinds from tariffs as reasons for its revised stance. The downgrade comes after Coty recently reported fourth-quarter results that missed earnings expectations, with a 9% year-over-year decline in like-for-like sales. The company's Prestige segment sales fell by 7%, while Consumer Beauty sales dropped by 12%. Reflecting these challenges, other analysts have also recently lowered their price targets for the beauty company.
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What Is The Market Telling Us
Coty’s shares are quite volatile and have had 18 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 14 days ago when the stock gained 8.1% on the news that a company disclosure revealed that CEO Sue Nabi purchased $1 million worth of its stock. According to a filing, Nabi acquired 260,000 shares on August 22. This purchase came just one day after the stock had plummeted to a new low following a disappointing quarterly report. The report on August 21 included a surprise adjusted loss and a wider-than-expected revenue decline, causing the stock to fall significantly. Such a substantial purchase by a top executive, particularly after a period of negative performance, is often interpreted by investors as a strong signal of confidence in the company's future prospects, suggesting leadership believes the stock is undervalued.
Coty is down 41% since the beginning of the year, and at $4.05 per share, it is trading 57.4% below its 52-week high of $9.51 from September 2024. Investors who bought $1,000 worth of Coty’s shares 5 years ago would now be looking at an investment worth $1,107.
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