L Brands (LB) Expert Call Offers 3 Reasons the Company Could Top 55% Sales Growth - UBS
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UBS analyst Jay Sole reiterated a Buy rating and $104.00 price target on L Brands (NYSE: LB) after hosting an expert call with an industry expert who sees Bath & Body Works growing faster than consensus estimates for Q3 suggest. The company will be lapping a 55% y/y growth rate from 3Q20 and conversations with investors indicate many believe strong mid-pandemic hand sanitizer demand drove the upside one year ago. The market's concern is hand sanitizer demand is falling as the world reopens and this could cause BBW sales to drop 15-25% in Q3 this year.
However, UBS' expert sees big opportunities for BBW to benefit from reopening in Q3 for 3 reasons:
1) A resumption of in person college and dorm residence
2) Consumers invite guests into their homes again
3) Halloween (an important October BBW business).
The analyst stated "These factors should help drive strong home fragrance, hand soap, and body care sales. Plus, the expert thinks back-to-work should be another sales driver". He went on to state "We think stronger than expected earnings growth and the upcoming separation of LB into two distinct companies will drive P/E expansion. For BBW in particular, we think a strong Q3 and the separation process could renew the market's appreciation for BBW's competitive advantages highlighted by our expert."
Shares of L Brands closed at $62.79 yesterday.
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