Why Tapestry Stock May Struggle to Meet Expectations

The security could be at the mercy of a potential recession

Jul 25, 2022 at 11:40 AM
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Tapestry Inc (NYSE:TPR) is up 0.3% to trade at $34.03 at last check. The equity earlier this month staged a bounce off the $30 level, but its rally lost steam near the $35 region, which also turned down the equity's early June surge. The descending 120-day moving average has been pressuring shares lower for the majority of the year as well, with TPR now down 16.3% in 2022.

TPR 120 Day

The brokerage bunch is overwhelmingly optimistic on TPR, with 10 of the 11 analysts in question calling it a "strong buy." Plus, the 12-month consensus target price of $44.61 is a 31.5% premium to current levels.

Moreover, Tapestry stock trades at a very attractive forward price-earnings ratio of 8.28 and a price-sales ratio of 1.42. TPR also offers a solid dividend yield of 2.95%, with a forward dividend of $1, making the security best suited for dividend, as well as value investors.

In addition, the luxury fashion concern is anticipated to generate 16.6% revenue and 16.5% earnings growth for 2022. TPR is also expected to increase its revenues and earnings 3.5% and 14.5%, respectively, for 2023.

However, with a potential recession looming, Tapestry could see dwindling demand for luxury goods. This means the company runs a higher risk of not meeting expectations. In addition, TPR holds an unfavorable balance sheet, with $816 million in cash and $3.43 million in total debt, which could further affect its growth rate. Nonetheless, Tapestry stock remains an appealing long-term investment, from a risk-reward perspective.


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