Coty (COTY) Stock Forecast & Price Target

Coty's fundamentals have significantly improved since 2020, bolstering its potential for a higher valuation despite short-term challenges, as evidenced by a 6.3% increase in comparable sales, surpassing consensus expectations of 3.5%. The company's fragrance segment has shown resilience, with a notable increase in buy rate relative to the category, contributing to strong sales growth in key markets such as Hong Kong. Management anticipates gradual improvement across both the mass and prestige segments, supported by upcoming product launches and expanded market outreach.

Coty's financial outlook has been downgraded significantly, with a projected LFL sales growth forecast of -1.9% for FY'26, reflecting weaker than anticipated guidance and resulting in adjustments to the adjusted EBITDA estimate down to $1 billion from $1.1 billion. Gross margins are set to decline, with a notable deleveraging of -195 basis points to 62.3%, alongside a deterioration in LFL sales that plunged to -9% year-over-year in the fourth quarter, worsening from a -3% decline in the third quarter. Additionally, the Consumer Beauty segment has struggled with LFL sales falling -12%, largely due to challenges in the mass color cosmetics category, indicating ongoing underperformance relative to broader market trends and competitors.