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L Brands Inc (NYSE:LB) and soon-to-be spun off Victoria’s Secret have Bank of America analysts bullish.
The L Brands Analyst: Lorraine Hutchinson, CFA, reiterated the firm’s Buy rating of L Brands and $90 price target.
The L Brands Takeaways: L Brands intends to spin-off Victoria’s Secret on Aug. 2, giving L Brands shareholders three shares of Victoria’s Secret for each share of L Brands, said Hutchinson.
Following the spin-off, L Brands will begin trading under Bath Body Works, Inc. (NYSE:BBWI). Victoria’s Secret, Inc. (NYSE:VSCO) will begin trading as well, according to an L Brands press release from July 9.
Based on L Brand’s Friday closing price of $73.50, the analyst estimates Bath Body Works trades at 9.5x FY22 EV/EBITDA and Victoria’s Secret trades at 5.5x FY22 EV/EBITDA.
A 9.5x FY22 EV/EBITDA multiple is particularly low considering Bath Body Works has “one of the most consistent growth stories in retail” and targets mid to high-single-digit EBIT growth over the next five years, says Hutchinson.
Bath Body Works’ net debt is below $2 billion now, and the company “is highly cash flow generative,” presenting an “opportunity for significant shareholder return,” said the analyst.
At 5.5x FY22 EV/EBITDA, Victoria’s Secret trades at a discount to peers and provides an opportunity to get in at the early stages of the company’s turn-around, says Hutchinson.
Through the last year, Victoria’s Secret has rebuilt its margins, said the analyst.
L Brands’ July 19 investor day will provide insight into Victoria’s Secret’s brand image and marketing overhaul, according to the analyst note.
LB Price Action: L Brands shares were up 3.95% to $76.39 at last check Monday.
Crypto Whales Are Loading Up — Are You?
New research shows the biggest crypto buyers are back. And this time? They could hold for the possibility that Bitcoin will surpass $100,000 in 2024. You don’t want to miss the next massive crypto bull run like we saw in 2020 and 2021. To know exactly what’s going on and what to buy… Get Access To Benzinga’s Best Crypto Research and Investments For Only $1.
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