By Sam Boughedda
Piper Sandler analysts downgraded shares of Bath & Body Works, Inc. (NYSE:BBWI) to Neutral from Overweight, cutting the firm's price target on the stock to $37 from $48 per share in a note Thursday.
The analysts believe that expectations for BBWI have been elevated since the company issued "what seemed to be rather conservative guidance on the FQ4 call."
However, now around two months later, Piper Sandler "sees plenty of reason for results to fall in line with management's outlook, largely on the basis of persisting margin pressures."
"While we continue to like management's strategy to reduce costs (~$200M in savings next 2 years) and grow its loyalty program, and we also view the recently announced leadership updates as supportive of longer-term strategic imperatives, we feel it's best to move to the sidelines now," explained the analysts. "We agree with many that previously issued guidance seemed conservative and delivered a nice estimate reset. Though, Street and investor expectations remain elevated, and we foresee persisting margin pressures that could push both FQ1 and FY'23 bottom line results in line with guidance and below current consensus estimates."
They concluded that even though valuation remains relatively low, they "fear current estimates are simply just too high," and Piper Sandler sees "little upside potential to current share levels from here."