BMO Slashes L Brands Price Target; Long-Term Still 'Compelling'

John Morris, analyst at BMO Capital Markets, lowered the firm's rating on L Brands Inc (NYSE: LB) to Market Perform from Outperform, slashing the price target to $76 from $103 – a 26 percent cut.

Near-term, BMO expects that the stock will struggle to gain, though Morris reiterated that "for longer-term investors, we believe L Brands remains a compelling story."

The change of opinion comes as Morris said that the brand's "improvement progressed perhaps faster than we had expected" with the company maintaining high operating margins. Instead, BMO said that the operating margin at Victoria Secret should be flat in Q2 and down on the year. Into this fall and holiday season, the company will also face difficult comps after a "nearly perfect execution" last year.

On the stock, Morris said that "near-term upside could prove more challenging, given recent incremental Y/Y promotions […] along with heavier-than-expected markdowns."

BMO lowered its 2015 and 2016 EPS expectations to $3.70 and $4, respectively. Previously, the firm modeled EPS of $3.95 and $4.52. The $76 price target reflects a 19x multiple on 2016 expected earnings.

L Brands initially sold off on Wednesday trading before recouping some of those losses late in the session. The stock closed down 1.6 percent at $81.10. On the year, the stock has lost 6.2 percent.