Is Ralph Lauren Stock A Buy?

-8.36%
Downside
126
Market
115
Trefis
RL: Ralph Lauren logo
RL
Ralph Lauren

[Updated: 08/10/2021] RL Stock Update

Investors were more than happy with Ralph Lauren’s (NYSE:RL) fiscal 2022 Q1 performance as well as revised guidance, and the stock rose 6%, post the earnings announcement. The company reported strong fiscal Q1 2022 results with revenues and earnings per share beating market estimates by $160 million and $1.43, respectively. The company saw its revenues grow 182% year-over-year (y-o-y) during the quarter, which included a 301% jump in North America, as consumers spent more on handbags, shoes, and clothes, fueling a rebound in the luxury goods industry. The company increased the marketing of its brand to capture the renewed demand. Ralph Lauren also raised its forecast for fiscal 2022 and now expects revenue to rise 25% to 30% on a 53-week reported basis, having previously estimated a 20% to 25% increase on a 52-week comparable basis. Now that almost 50% of the U.S. population is fully vaccinated, the company’s sales are expected to rise, boding well for RL stock over the coming quarters.

Ralph Lauren’s stock has settled down 4% since it spiked post Q2 results. We have updated our model following the Q2 release and believe the stock has an upside of 15%. We now forecast sales to be $5.6 billion for the full year 2022, up 27% y-o-y, compared to our previous estimate of $5.3 billion. Looking at the bottom line, we estimate EPS to be $6.10, compared to our earlier estimate of $5.72. Given the changes to our revenues and earnings forecast, we have revised our Ralph Lauren Valuation at $139 per share, based on a $6.10 expected EPS and a little under 23x P/E multiple for FY 2022. This marks an 18% growth from our prior estimate, and reflects a premium of nearly 15% to the current market price of $121.

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[Updated: 08/05/2021] RL Stock Update

Ralph Lauren’s stock (NYSE: RL), a company engaged in the design, marketing, and distribution of premium lifestyle products, including apparel, accessories, fragrances, and home furnishings, has increased 12% over the last five trading days (one week) and currently stands at around $123. It should be noted that the broader S&P500 returned a flat growth during the same period. RL stock spiked this week as it reported strong fiscal Q1 2022 results with revenues and earnings per share beating market estimates by $160 million and $1.43, respectively. The company saw its revenues grow 182% year-over-year (y-o-y) during the quarter, which included a 301% jump in North America. Evidently, consumers have started spending more on handbags, shoes, and clothes firing a rebound in the luxury goods industry. It should be noted that the high-end apparel seller’s marketing spends in the first quarter were double that of the year-ago period and about 40% higher than 2019 – as it sponsored the U.S. Olympic team and events such as Wimbledon and Major League Baseball. The company increased the marketing of its brand to capture the renewed demand. Ralph Lauren also raised its forecast for fiscal 2022 and now expects revenue to rise 25% to 30% on a 53-week reported basis, having previously estimated a 20% to 25% increase on a 52-week comparable basis.

Now, is RL stock poised to grow further? While the demand for RL’s products seems to be growing, the increase in the new Delta variant cases could likely dampen this momentum in the near term, and the company’s stock could see declines going forward. Specifically, there is a 51% chance of a fall for RL stock over the next month (twenty-one trading days) based on our machine learning analysis of trends in the stock price over the last ten years. See our analysis on RL Stock Chances of Fall for more details.

Calculation of ‘Event Probability’ and ‘Chance of rising’ using last 10 year data

[1] 12% or higher return during a five-day period in 43 times out of 2517; Stock rose in the next five days in 16 of these 43 instances

[2] 11% or higher return during a ten-day period in 138 times out of 2517; Stock rose in the next ten days in 60 of these 138 instances

[3] 6.9% or higher return during a twenty-one-day period in 534 times out of 2517; Stock rose in the next twenty-one days in 259 of these 534 instances

E-commerce is eating into retail sales, but this might be an investment opportunity. See our theme on E-commerce Stocks for a diverse list of companies that stand to benefit from the big shift.

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