European Launch of Kylie Skin Boosts Coty Stock by 15%


Shares of Coty (COTY) rose by 15% on Friday to $3.85, after the company announced that its Kylie Skin products are now available at Douglas, a beauty retailer with around 2,400 locations across Europe. The announcement boosted Coty’s valuation by a full $300 million. Douglas will offer six different products from the Kylie Skin line, including the Foaming Face Wash, Walnut Face Scrub, Face Moisturizer, Eye Cream, Vanilla Milk Toner and Vitamin C Serum.

“We have started to build a strong foundation to support our strategic partnership with Kylie Jenner. The launch of Kylie Skin in Europe is a next step as we accelerate the integration and build Kylie Jenner’s beauty businesses into a global powerhouse brand,” said Simona Cattaneo, President of Luxury Brands at Coty.

Coty acquired a controlling stake in Kylie Jenner’s cosmetics startup, Kylie Cosmetics, last November for $600 million. The deal increased the company’s debt load, but at the time management indicated that it expected its return on invested capital to exceed the associated cost by 2023.

The stock fell significantly two weeks ago when Coty reported subpar quarterly results, revealing stalling revenue growth and falling net income. The stock has suffered through a very difficult year on Wall Street; even with Friday’s jump, shares are down over 70% in the last year.

TipRanks data reveals a Hold consensus for Coty.  Yet with the dramatic decline COTY shares has experienced of late, the analyst price target for COTY still represents 57% upside at $5.89 per share over the coming 12 months. (See COTY stock analysis on TipRanks).

“Difficult operating environment for COTY and unfortunately things will likely get worse before they get better” summed up RBC Capital’s Nik Modi. However, the stock’s lone bull added that he believes “management is making the right structural decisions (i.e. cost cutting, shifting decision making to be more local, partnership with KKR) to position the Company well for a post-COVID environment.”

As a result Modi lowered his FY’20 sales/EBIT estimates, but left his price target unchanged at $8 (113% upside potential).

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