Canaccord Genuity has lowered its 12-month price objective for Coty Inc. (NYSE:COTY) to $2.50 from $3.50 while keeping a Hold recommendation after the beauty group's mixed results for the second quarter of fiscal 2026. The stock was trading around $2.66 at the time of the update, having fallen 17.9% over the past week and 60.65% over the previous 12 months.
On February 5, Coty reported second-quarter sales that rose 0.5% year-over-year, a result that modestly beat expectations for a decline. However, adjusted EBITDA came in at $330 million, below Canaccord’s internal forecast of $337.5 million and the broader Street estimate of $335.9 million. The company’s reported earnings per share were $0.14, missing the $0.18 consensus forecast, a 22.22% negative surprise. Revenue was $1.68 billion, narrowly ahead of the $1.66 billion analysts had anticipated.
Despite those shortfalls, data cited from InvestingPro indicate Coty sustains a healthy gross profit margin of 63.68% and that the business may be trading below its assessed Fair Value. Management said like-for-like sales declined 3% in the quarter, which aligns with prior guidance that results would fall toward the better end of a -5% to -3% range. Both the Prestige and Consumer Beauty segments registered sequential improvement, a point the company highlighted as a positive trend.
Looking ahead, Coty’s guidance for the third quarter points to a sequential revenue decline even as year-over-year comparisons become easier. Management now expects like-for-like sales to fall by mid-single digits versus the second quarter’s low-single-digit decline. In addition, Coty has withdrawn its fiscal 2026 targets for adjusted EBITDA and free cash flow, removing prior full-year guidance.
Canaccord attributed its reduction in the price target to two main factors: ongoing negative sales growth and uncertainty tied to the company’s leadership transition. The new $2.50 objective is calculated at 7 times Canaccord’s updated adjusted EBITDA estimate for fiscal 2027. Analyst targets across the coverage universe range from $2.50 to $8.00, and InvestingPro shows seven analysts have recently reduced earnings estimates for Coty.
Credit agency Moody’s affirmed Coty’s Ba1 Corporate Family Rating but altered the outlook from stable to negative, citing weaker-than-expected operating performance. Moody’s left intact several other ratings, including the Ba1-PD Probability of Default Rating, Ba1 senior secured first lien revolving credit facility rating, Ba1 senior secured ratings, and Ba1 senior unsecured ratings. The company’s speculative grade liquidity rating was also unchanged.
The results and subsequent analyst reaction leave Coty in a position of mixed operational signals: solid margins and sequential segment improvement tempered by missed EBITDA and EPS targets, withdrawn full-year guidance, and a more cautious credit outlook. Investors and market participants will likely watch leadership developments, like-for-like sales trends, and the company’s ability to restore multi-quarter revenue growth closely.
Summary
Canaccord trimmed its Coty price target to $2.50 from $3.50 and maintained a Hold after the company posted modest revenue growth but missed adjusted EBITDA and EPS estimates for Q2. Management has pulled fiscal 2026 adjusted EBITDA and free cash flow guidance, and Moody’s moved Coty’s outlook to negative while maintaining its Ba1 ratings. The new target is based on 7x Canaccord’s fiscal 2027 adjusted EBITDA forecast.
Key points
- Canaccord lowered its Coty price target to $2.50 and retained a Hold rating.
- Coty reported Q2 revenue of $1.68 billion and adjusted EBITDA of $330 million; EPS was $0.14.
- Management expects like-for-like sales to decline by mid-single digits in Q3 and has withdrawn full-year 2026 adjusted EBITDA and free cash flow guidance.
Risks and uncertainties
- Leadership transition uncertainty - Could affect strategic execution and investor confidence in the consumer and beauty sectors.
- Continued negative like-for-like sales growth - Presents risks to top-line recovery and to the retail and personal care market segments.
- Credit outlook deterioration - Moody’s shift to a negative outlook highlights downside risks for access to capital and cost of borrowing in the near term.