RL - Ralph Lauren stock is trading below its fair value - analyst says

2023-09-24 17:19:24 ET

The recent sell-off in Ralph Lauren Corp (NYSE: RL) has created a great opportunity for investors to buy a quality name at a deep discount, as per a Raymond James analyst.

Ralph Lauren stock could return to $135

Rick Patel is convinced that shares of the fashion company are currently trading below their fair value.

On Friday, therefore, he upgraded the Ralph Lauren stock to “outperform” and raised his price target to $135 a share which suggests about a 20% upside from here.

The analyst is betting primarily on a continued increase in market share (international) that will translate to revenue growth for the U.S. firm.

We like the setup where expectations have come down, estimates appear to signal a low bar, and valuation is attractive, in our view, given a [price-to-earnings ratio] of ~11x.

Ralph Lauren is committed to improving margins

Patel is constructive on the retail stock also because he expects margins to improve moving forward now that Ralph Lauren is focusing more on cost savings.

Other reasons cited for the bullish call on the apparel company include the growing unit volume and selling prices (average) particularly in international markets like Asia.

Note that the Ralph Lauren stock currently pays a dividend yield of 2.68% that makes up for an additional reason to have it in your portfolio.

Last month, the New York headquartered firm reported its financial results for the first quarter that came in well ahead of Street estimates.

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