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L Brands Has Value Without Victoria's Secret Deal, BMO Says In Upgrade

L Brands Has Value Without Victoria's Secret Deal, BMO Says In Upgrade

Shares of L Brands Inc (NYSE: LB) Monday tumbled in after-hours trading on news of Sycamore Partners LLC terminating its agreement to acquire a majority stake in Victoria’s Secret.

Once the noise related to the deal dies down, the focus will be on the company’s underlying fundamental value, according to BMO Capital Markets.

The L Brands Analyst

Simeon Siegel upgraded the rating for L Brands from Market Perform to Outperform with a $17 price target.

The L Brands Thesis

Although Victoria’s Secret generates massive revenue for L Brands, the troubled lingerie brand is likely losing money, Siegel said in the Tuesday upgrade note. (See his track record here.)

The COVID-19 crisis has led to a revenue decline at Victoria’s Secret, which may be a positive, giving management “a very unique opportunity to re-evaluate all aspects of the brand,” the analyst said. This may help the brand become smaller, yet healthier, he said. 

L Brands seems to be preparing Victoria’s Secret to operate as a standalone entity, and the brand is likely to carry positive value, Siegel said. 

Referring to Bath & Body Works, the analyst said that there is no reason to expect sales growth to taper off after the COVID-19 crisis is over. Even assuming lower margins than the 20% range still suggests an acceleration in sales growth from current levels, he said. 

LB Price Action

L Brands shares were down 2.41% at $11.76 at the time of publication Tuesday. 

Related Links:

L Brands Closer To Victoria's Secret Sale, CNBC Says; Link Calls Brand 'Mismanaged'

L Brands Option Trading Extremely Bearish Following Victoria's Secret Buyout Reports

Photo by Samantha Marx via Wikimedia

Latest Ratings for LB

Jun 2021CIBCMaintainsUnderperformer
Jun 2021RBC CapitalMaintainsOutperform
May 2021Morgan StanleyMaintainsOverweight

View More Analyst Ratings for LB
View the Latest Analyst Ratings


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