Tapestry Downgraded by Jefferies as Valuation Caps Upside

Core Viewpoint - Tapestry (NYSE: TPR) has been downgraded from Buy to Hold by Jefferies, with a revised price target of $138, down from $142, reflecting a more balanced risk-reward profile after a recent stock price increase [1] Group 1: Financial Estimates and Valuation - Jefferies raised its second-quarter estimates above consensus due to accelerating alternative data through December, but reduced longer-term projections due to risks associated with average unit retail-driven slowdown [1] - Tapestry is currently trading in the low-20s on a price-to-earnings basis, significantly above its historical average of approximately 12x and peer multiples near 16x, indicating a premium valuation compared to the retail ETF benchmark [2] Group 2: Risks and Strengths - Risks identified include challenging average unit retail comparisons, potential slowing fashion cycles, and increased discounting in the U.S. market, particularly among younger consumers [3] - The company's nearly 90% direct-to-consumer mix and customer-focused innovation strategy are considered long-term strengths, although the valuation should trade at a discount due to Tapestry's more fashion-oriented portfolio [3] Group 3: Potential Catalysts - A strong December 2025 quarter and potential tariff repeal could serve as near-term catalysts for Tapestry, although the upside appears largely reflected in the current valuation [2] - The estimated earnings boost from tariff repeal is approximately $0.40 per share, but this impact is seen as less incremental for Tapestry compared to some peers due to its strong margins and mitigation strategies [4]