What Happened?
Shares of intimatewear and beauty retailer Victoria’s Secret (NYSE: VSCO) fell 4.3% in the morning session after Morgan Stanley reiterated a cautious "Hold" rating on the stock, flagging concerns about future profitability and limited earnings visibility.
The analyst, Alexandra Straton, acknowledged that Victoria's Secret's second-quarter results topped expectations, suggesting its turnaround efforts are gaining traction. However, the firm remains cautious, pointing to significant headwinds. The report highlighted that earnings before interest and taxes (EBIT) margins are still below historical averages and that management's third-quarter guidance was softer than expected. The analyst cited challenges from tariff pressures, increased marketing expenses, and rising labor costs. This cautious view appeared to overshadow more optimistic news from the previous day, when Jefferies raised its price target on the stock due to strong momentum.
The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks. Is now the time to buy Victoria's Secret? Access our full analysis report here, it’s free.
What Is The Market Telling Us
Victoria's Secret’s shares are extremely volatile and have had 40 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 1 day ago when the stock gained 1.9% on the news that Jefferies raised its price target on the stock to $30 from $26, citing strong momentum. The investment bank's move reflects growing confidence in the company. This follows a similar price target increase from UBS in late August, which raised its target to $25 after Victoria's Secret reported second-quarter results that surpassed analyst expectations. According to UBS, the company's quarterly report showed its turnaround is gaining traction. Adding to the positive developments, the specialty retailer also expanded its travel retail footprint, opening a new store at London Luton Airport in partnership with Avolta.
Victoria's Secret is down 35.4% since the beginning of the year, and at $26.11 per share, it is trading 46.4% below its 52-week high of $48.71 from December 2024. Investors who bought $1,000 worth of Victoria's Secret’s shares at the IPO in July 2021 would now be looking at an investment worth $614.35.
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