Tapestry Stock Up 30%, What's Next?

Group 1 - Tapestry has seen a 27% year-to-date increase, outperforming the S&P 500's 2% return and Ralph Lauren's 15% growth, driven by strong Q3 earnings and an upward adjustment to FY2025 forecasts [3] - The company has raised revenue and EPS expectations due to improving gross margins and appeal to younger consumers [3] - Despite the positive outlook, Tapestry stock is considered fully valued at approximately $83, with limited upside potential due to mediocre long-term fundamentals [3][4] Group 2 - Tapestry's revenue growth has been modest, with a three-year compound annual growth rate of only 1.0%, compared to the S&P 500's 5.5% [5] - Revenue increased by 2.7% over the past year to $6.9 billion, with Q3 2025 showing an 8% year-over-year growth, outpacing the S&P's 4.8% [5] - Profitability metrics include a 17.9% operating margin and a 12.5% net income margin, slightly above the S&P's 11.6% [6] Group 3 - Tapestry has a strong financial structure, with $4.1 billion in debt against a market capitalization of $17 billion, resulting in a manageable debt-to-equity ratio of 25.3% [6] - The company has a healthy 14.5% cash-to-assets ratio, allowing for investment and capital return [6] Group 4 - Tapestry has historically underperformed during market downturns, with significant declines during the 2022 inflation shock, 2020 COVID crash, and 2008 financial crisis [7] - The stock fell 46% during the 2022 inflation shock compared to the S&P 500's 25% drop, and 64% in the 2020 COVID crash versus 34% for the index [7] Group 5 - Overall, Tapestry rates neutrally on growth and profitability, strongly on financial stability, but very weakly on downturn resilience, leading to an uninspiring investment profile [8] - Despite recent gains and a seemingly fair valuation, the stock's unimpressive fundamentals and poor track record during market shocks render it risky [8]