4 Reasons Why This Ralph Lauren Analyst Is Bullish: 'Lower Cotton, Freight Expenses'

Shares of Ralph Lauren Corp (NYSE: RL) Monday continued their upward trajectory, after the spike on Friday last week.

The company added around 1.3 million new consumers every quarter to its DTC channel over the past couple of years and the rapid growth continues, according to Guggenheim.

The Ralph Lauren Analyst: Robert Drbul upgraded the rating for Ralph Lauren from Neutral to Buy, while establishing a price target of $166.

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The Ralph Lauren Thesis: The company’s investments in high-quality customer recruitment and higher distribution seem to be working, as it added 1.2 million new customers last quarter, Drbul said in the upgrade note.

The analyst listed four reasons for the upgrade in rating:

1. There is upside to the current consensus estimates for earnings in fiscal 2024 and 2025, given opportunities for gross margin expansion due to “clean inventories, lower freight expenses, and lower cotton prices.”
2. Prices of cotton, which represents about 80% of Ralph Lauren’s materials, have declined by 27% over the past 18 months.
3. The stock is trading at “just 6.3x our updated and increased FY25 EBITDA estimate,” and should be trading at a multiple closer to 9x.
4. The recent pullback in Ralph Lauren’s shares provides “an attractive entry point.”

RL Price Action: Shares of Ralph Lauren had risen by 1.88% to $116.00 at the time of publication Monday.

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