vdostalik
Long

Great Entry Point for COTY

NYSE:COTY   COTY INC
We are seeing a great entry point for NYSE:COTY .
The company has been hit by the current crisis and the stock has plunged after the Earnings Report released this Monday 5/11. Investors have left their positions due to concerns around financial conditions, bad results and dividends on hold.
Currently, the stock is on its historical lows, which makes it a great entry. COTY announced a deal with KKR, and will receive an immediate $750M investment. The entire transaction could result in additional cash proceeds of approximately $3 billion. With this liquidity injection and a strong capital back-up, COTY is likely to strengthen its position against EURONEXT:OR , NYSE:EL , and other competitors. The current analyst price targets reiterated on 5/12 are between $8 ( RBC Capital) and $6 (Deutsche Bank). Recent hedge fund activity is also in line with positive sentiment around COTY stock. For more details check the research tab in the stock details here at eToro.

I believe in COTY as a company with strong foundations because it is a strong global player:
  • #1 in fragrances
    #2 in salon hair
    #3 in color cosmetics

NYSE:SBH NASDAQ:ULTA AMEX:XLY NYSE:PG

Comments

I don't understand why you would long a company making heavy losses , has a debt that is 3x the market cap and cut its dividend. I'm not criticising, only trying to understand the reason behind it. Future value, yes agreed, but with such high debt, when will this company start making money again? But great call, stocks already up 20% since your call
Reply
vdostalik VickerC
@VickerC - fair comment. I do agree those indicators are important and I did consider it. There was a few things that made me believe the things you mention would be already priced in. (I'll make a more detailed overview of those at some point). I think there is a fair chance coty is already out of the worst (if the market recovers).
However I do agree this stock is still risky and will likely be volitile going forward, given the current uncertainty on consumer markets.
Reply
VickerC vdostalik
@vdostalik, Sounds logical. I have the feeling that the market is pricing in new information very quickly lately. Even a hint of possible profits for a company who is in deep debt can make the stock rise very fast (e.g. Overstock). Could this be because times are changing?

I would love to hear the details of those points.

Thank you for sharing your insights
Reply
Princejpj VickerC
@VickerC, KKR can def help with debt, through 60/40 acquisition, COTY is getting up to around 4 billion dollars in total from them.
Reply
VickerC Princejpj
@Princejpj, 4 billion is a lot of money. This explains why investors could turn bullish for COTY.

Thank you for the reply
Reply
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