RBC Capital has reaffirmed its Outperform rating on Coty Inc. and kept a $10.00 price target as the cosmetics and beauty company prepares to report fiscal second-quarter 2026 results on February 5. The research house expects Coty’s quarterly figures to come in generally within the company’s existing guidance range and characterizes the upcoming release as likely to be a neutral event for the share price.
The brokerage highlighted several items that will shape investor reaction to results. First among them is how Markus Strobel - recently named executive chairman and interim CEO - frames the state of the business and lays out near-term strategy. Market participants will also be watching any commentary on category trends and whether management provides updated guidance for the second half of fiscal 2026.
RBC noted that consensus expectations for Coty’s second half appear reasonable at present, but cautioned that the company may continue to be viewed as a "show me" story while it works through an ongoing operational and financial reset. That skepticism is reflected in the stock's market performance, which has fallen by more than 54% over the last 12 months.
Despite the headline challenges, the analyst emphasized that Coty’s valuation remains notably inexpensive. RBC pointed to the company’s leverage metric approaching 3x as a factor supporting its positive stance. Independent data cited by the research firm reports a free cash flow yield of 10% and gross profit margins of 64.55% for Coty, and a Fair Value model indicates the shares look undervalued at the then-current price of $3.21.
Recent corporate moves also figure into the firm’s view. Coty sold its remaining 25.8% stake in Wella, a transaction that led to a change in outlook to stable from S&P Global Ratings and is expected to materially reduce leverage by the end of 2025. As part of the Wella sale to KKR, Coty will receive $750 million upfront, which management intends to use to pay down both short- and long-term debt.
Leadership shifts have continued alongside the financial moves. Markus Strobel succeeded Peter Harf and Sue Nabi as executive chairman and interim CEO; following the departure of Sue Nabi, Evercore ISI lowered its view of the shares to an "In Line" rating. Coty has also announced a strategic collaboration with OpenAI to roll out ChatGPT Enterprise tools across selected parts of its global organization, a step the company expects will improve operational efficiency with advanced AI models.
Collectively, these developments underscore a period of active transformation at Coty, touching capital structure, leadership and technology adoption. RBC’s Outperform call rests on the combination of a low valuation, improving leverage prospects after the Wella transaction and the expectation that near-term results will not materially surprise the market.
Summary of key elements:
- RBC maintains Outperform and $10.00 price target ahead of F2Q’26 results on February 5.
- Expectations are for results to arrive broadly within guidance; the report is seen as likely neutral for the stock.
- Investor attention concentrated on interim CEO Markus Strobel’s commentary, category trends and second-half fiscal 2026 guidance.
Context and metrics cited:
- Stock has declined over 54% in the past year.
- Leverage approaching 3x, with proceeds from the Wella sale ($750 million upfront) earmarked to reduce debt.
- Investment data referenced: free cash flow yield of 10% and gross profit margins of 64.55%; fair value model suggested the shares were undervalued at $3.21.
Transformation moves and market reaction:
- Coty sold its remaining 25.8% stake in Wella; S&P Global Ratings revised its outlook to stable.
- Leadership change: Markus Strobel named executive chairman and interim CEO, succeeding Peter Harf and Sue Nabi.
- Evercore ISI downgraded the stock to "In Line" after the CEO departure.
- Strategic collaboration with OpenAI announced to deploy ChatGPT Enterprise in selected areas of Coty’s global operations.
Bottom line: RBC’s position balances the near-term neutrality it expects from the upcoming earnings print against what it sees as a cheaply valued company with a credible path to lower leverage following the Wella transaction. For now, investor judgment may hinge on management’s communications and the company’s ability to convert proceeds into meaningful debt reduction and operational progress.