Coty Inc. (NYSE:COTY) is one of the 13 Best American Penny Stocks to Invest In. On February 9, Morgan Stanley reduced its price target on Coty Inc. (NYSE:COTY) from $4.25 to $3.50 and kept an Equal Weight rating on the stock. This update came after the company reported Q2 results, which Morgan Stanley noted were slightly below plan. The company’s Q3 EBITDA guidance was well below consensus estimates. Morgan Stanley pointed out that “the key negative” was the withdrawal of the fiscal 2026 guidance. The res ...

Core Viewpoint - Coty Inc. is experiencing a transition phase following the departure of its CEO, leading to multiple downgrades from analysts and concerns about the company's future performance [1][2][3]. Group 1: Analyst Downgrades - Banco Santander downgraded Coty Inc. from Outperform to Neutral with a price target of $3.50, citing a prolonged transition phase due to the CEO change [1]. - Evercore ISI also downgraded Coty Inc. from Outperform to In Line, setting a price target of $7, and described the current moment as a "pivotal juncture" for the company [2]. - TD Cowen lowered its price target from $4.00 to $3.75 while maintaining a Hold rating, highlighting risks such as inventory reductions and a challenging environment in mass cosmetics [4]. Group 2: Company Performance and Challenges - The Consumer division of Coty Inc. accounts for approximately 15% of its profits but is associated with significant operational challenges and negative sentiment [3]. - Evercore ISI noted limited visibility on timing and catalysts for a potential value unlock, suggesting that the stock is currently undervalued but may remain so in the near term [3]. - The company is undergoing a strategic review of its Consumer division, which is critical for its future direction [2].

Core Insights - Coty has agreed to sell its remaining 25.8% stake in Wella to KKR for an upfront cash payment of $750 million, completing its divestment plan initiated in 2020 [1] - The transaction is expected to enhance Coty's financial position by lowering its net leverage to around 3x by the end of CY25, with a long-term goal of achieving a leverage ratio of 2.0x [2][3] - Coty plans to use the majority of the cash proceeds to reduce both short- and long-term debt, alongside anticipated free cash flow of over $350 million in the first half of FY26 [3] Financial Performance and Strategy - Coty anticipates additional cash inflows from the Wella transaction, which could bring total gross returns closer to the book value of its investment [2] - The strategic partnership with KKR has been beneficial, allowing Coty to capitalize on Wella's growth and strengthen its financial foundations [4] Business Review - In October, Coty initiated a strategic review of its consumer beauty segment, focusing on its $1.2 billion mass color cosmetics business and its Brazilian operations generating close to $400 million in revenue [5]

Core Viewpoint - Coty Inc. is under investigation for potential violations of federal securities laws, following a decline in demand for its products and subsequent disappointing financial results [1][2][3]. Group 1: Company Overview - Coty Inc. is one of the largest beauty companies globally, with a diverse portfolio that includes fragrance, color cosmetics, and skin and body care [2]. - Prestige fragrances represent 60% of Coty's revenues, indicating a significant reliance on this segment [2]. Group 2: Financial Performance - On August 20, 2025, Coty reported disappointing financial results for Q4 and FY 2025, citing issues such as retailer inventory buildup and execution weaknesses in the U.S. market [3]. - The company's stock price fell by $1.05 per share, a decline of over 21%, from $4.86 on August 20, 2025, to $3.81 on August 21, 2025, following the announcement of these results [3]. Group 3: Investigation Details - The investigation by Bleichmar Fonti & Auld LLP is focused on potential misrepresentations regarding the demand for Coty's products and the actual inventory levels held by retailers [1][2].

Core Viewpoint - Coty Inc. experienced a significant drop in share price following the release of its FY 2025 and Q4 financial results, which highlighted ongoing inventory destocking issues and weak revenue performance [1][4]. Company Overview - Coty Inc. is one of the largest beauty companies, with a diverse portfolio that includes fragrance, color cosmetics, and skin and body care products. The company operates through two reporting segments: Prestige and Consumer Beauty, which contributed approximately 65% and 35% of its revenues in 2025, respectively [2]. Financial Performance - In its Q4 report, Coty disclosed substantial year-over-year revenue declines in both its Prestige and Consumer Beauty segments. The company attributed its poor financial results partly to retailers' inventory reduction, a situation it had previously downplayed since the transition to its digital inventory strategy [4]. Investigation Details - Hagens Berman, a national shareholders rights firm, has initiated an investigation into whether Coty misled investors regarding its growth prospects and the effectiveness of its digital inventory strategy, specifically the SAP S/4HANA transition [3][5]. The firm is examining claims that Coty may have overloaded retailers with excess inventory to manage its own inventory buildup and meet earnings expectations [5]. Market Reaction - Following the earnings call and the revelation of inventory issues, Coty's share price fell by $1.05, representing a 21% decrease [1].