Investing.com -- Raymond James has upgraded Capri Holdings to Strong Buy from Outperform, citing a low valuation bar, an expected solid quarter and room for long-term margin expansion.

Analyst Rick Patel noted that the stock trades at about 6 times fiscal 2028 EPS, on estimates he believes have room to move higher. Shares are down 5% since Capri’s fiscal first-quarter results. However, shortly after the open on Friday, the stock has gained around 3%.

Raymond James expects fiscal second-quarter results to meet or beat expectations for revenue and earnings.

The firm said this view is underscored by positive management commentary at a September investor conference, where Capri said its view on the Michael Kors turnaround had shifted from “cautiously optimistic” to “optimistic.”

Patel also pointed to progress in the first quarter. Full-price comparable sales were positive in key markets, average unit retail grew, and wholesale point-of-sale turned positive.

The firm sees sequential improvement in the second half of fiscal 2027, including a positive revenue inflection as Capri laps self-help-related headwinds and as product and inventory availability improve.

On margins, Patel said: “There is significant focus on expense; in our view, the FY27 guide of ~5% is far too low for a portfolio of affordable luxury brands.”

Raymond James also pointed to market reports of potential acquisition interest in Capri. The firm said this is not its base case but should create a floor for sentiment.

“We see favorable risk/reward despite somewhat limited near-term visibility,” Patel wrote.

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