Stifel Affirms Coty (COTY) at 'Buy'; ghd Acquisition Shows Willingness to Perform Deals
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Stifel affirms its Buy rating and $32 price target on Coty Inc. (NYSE: COTY) after the company announced that it has reached a definitive agreement to acquire ghd from Lion Capital LLP for approximately £420 million (ca. $510 million) in cash.
The firm commented on Monday:
Overall, we believe the acquisition is notable as it indicates Coty’s willingness to do more deals and also that the company remains committed to the professional hair care business acquired from Procter & Gamble. We believe Coty remains in the very early innings of a considerable opportunity to build a global beauty business, with improving results in the legacy business coupled with the acquisition of select P&G beauty brand providing increasing optionality. We continue with our Buy rating and $32 price target, 23x and 15x F2018E EPS and EBITDA, respectively, with the premium multiple justified by an anticipated gradual improvement in sales growth, ongoing productivity initiatives, and longer-term optionality to utilize strong cash flow to make meaningful acquisitions.
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