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Deutsche Bank Starts Ralph Lauren (RL) at Buy; Core Luxury Holding

June 25, 2013 11:19 AM EDT
Get Alerts RL Hot Sheet
Price: $187.76 +0.68%

Rating Summary:
    17 Buy, 17 Hold, 1 Sell

Rating Trend: Down Down

Today's Overall Ratings:
    Up: 13 | Down: 11 | New: 11
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Deutsche Bank initiated coverage on Ralph Lauren (NYSE: RL) with a Buy rating and $190 price target, calling it a "core luxury holding" that h as "legs" to boat.

Analyst Dave Weiner comments, "Despite an already leading luxury position in the U.S., RL continues to push the needle on growth, including meaningful prospects in Europe, the forthcoming benefits of the Greater China 'reset', a positive mix shift into accessories (from apparel), and into retail (from wholesale). Importantly, growth is 'balanced' alongside continuous, strategic, and high-return investments back in the business, which should anchor long-term investors interested in a core luxury brand with ample opportunities."

Key themes for Ralph Lauren, according to the analyst, are: First, high-quality operations and global growth opportunities anchor investors; Second, geographic and product mix shifts drive a positive margin cycle; Third, we believe that some of last year's headwinds are now FY14 tailwinds.

The firm's $190 rice target is based on a 15% LT EPS growth profile and a 130% PE/G (~19x P/E) on our FY15 model. The key downside risk is to valuation, and particularly so if core revenues weaken below +MSD y/y.

For an analyst ratings summary and ratings history on Ralph Lauren click here. For more ratings news on Ralph Lauren click here.

Shares of Ralph Lauren closed at $168.58 yesterday.


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