Tapestry Inc. (TPR) PT Raised to $63 at Evercore ISI

Evercore ISI analyst Michael Binetti raised the price target on Tapestry Inc. (NYSE: TPR) to $63.00 (from $47.00) while maintaining a Outperform rating.

The analyst comments "Today the courts ruled in the FTC’s favor for a preliminary injunction to stop TPR’s acquisition of CPRI. As mentioned in our April 12th note (here), in this scenario we expected TPR to trade to $51/share quickly if the deal broke down. While TPR/CPRI will follow an appeals process through February, the odds are much worse, and we expect the stock to trade like the deal is broken. ◼ EPS Mechanics in a Deal Break: TPR paused ~$700m/year of share buybacks in FY24 and in its guidance for FY25 ahead of the deal closing. If the deal block becomes final, TPR theoretically has up to $1.4B of pent-up buyback power later this year (13.5% of current market cap). We think TPR will feel compelled to pursue some sort of accelerated repurchase with the stockpiled cash. If we assume some leakage from the excess cash (breakup fees, debt paydown fees)—and the fact that the court block likely won’t be finalized until Feb-2025—$1B of share buyback in F2H would raise our FY25 EPS estimate from $4.50 to $4.65 (+3%). Adding back $700m more of repos to our FY26E EPS increases our current estimate from $4.90 to $5.55 (+13%). ◼ What’s it Worth? Raising 1-Year Target Price to $63 (from $47), Current Value ~$53: At an 11.4x P/E (TPR’s 10x pre-deal P/E plus +13% appreciation in the S&P multiple since then) on those estimates would translate to current value of $53/sh today, and to a 1-year forward valuation of $63/share. We raise our target price to $63 from $47. ◼ Back to Business: F1Q Outlook: Refocusing on fundamentals, we think both Coach & Kate had a solid F1Q (reporting 11/7). Despite all the pressure luxury brands have reported in China, we think Coach China could be surprising a source of F1Q upside. We see upside to our F1Q EPS estimate of $0.95 (Consensus also $0.95)."

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