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Coty to Acquire 20% Stake in Kim Kardashian West’s Makeup Brand

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Coty (NYSE:COTY) stock rose 14.6% in pre-market trading at 8:55 AM ET today. The stock rose due to reports that the company will acquire a 20% stake in Kim Kardashian West’s makeup brand. The deal will likely be complete in the third quarter of fiscal 2021.

According to a MarketWatch report, “Under terms of the deal, Coty will pay $200 million for a 20% interest in Kardashian West’s beauty business, and will be responsible for developing skincare, haircare, personal care and nail products, while Kardashian West will lead creative efforts in product and communication initiatives.”

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Coty’s growth projections

In the third quarter of fiscal 2020, which ended in March, Coty delivered revenue of $1.53 billion—a decrease of 23.3% YoY (year-over-year). Wall Street expected revenue of $1.57 billion. Coty reported an adjusted EPS of -$0.08 compared to $0.13 in the third quarter of fiscal 2019. The adjusted earnings missed analysts’ consensus estimate of $0.00 per share.

Wall Street analysts expect Coty to post an adjusted EPS of -$0.11 on sales of $1.3 billion in the fourth quarter of fiscal 2020. Analysts also expect the company’s sales to decline 17.5% YoY in fiscal 2020 to $7.14 billion. The sales could rise by 1.8% YoY in fiscal 2021 to $7.27 billion. The adjusted EPS will likely decrease from $0.65 in fiscal 2019 to $0.16 in fiscal 2020. Analysts also expect an adjusted EPS of $0.37 in fiscal 2021.

Analysts’ target price for Coty

Among the 14 analysts following Coty stock, 11 recommend a “hold,” two recommend a “buy,” and one recommends a “sell.” Wall Street analysts’ mean target price on the stock is $5.88, which implies a 40.7% gain from the current level of $4.18. The consensus target price for the stock has risen from $5.84 in May—a growth of 0.7%.

Stock returns

Coty stock fell 4.1% on June 26 and ended the day at $4.18. At this closing price, the company’s market capitalization is $3.2 billion. Notably, the stock is trading 69.1% below its 52-week high of $13.54 and 38.4% above its 52-week low of $3.02.

Based on the closing price on June 26, Coty stock was trading 13.3% below its 20-day moving average of $4.82. The stock is also trading 11.4% below its 50-day moving average of $4.72 and 33.1% below its 100-day moving average of $6.25. Coty’s 14-day relative strength index score is 43, which indicates that it’s approaching the oversold levels.

Coty stock has an upper Bollinger Band level of $5.74, while its middle Bollinger Band level is $4.80. On June 26, Coty stock closed near its lower Bollinger Band level of $3.85, which indicates that it’s oversold.

At 9:39 AM ET today, the Dow Jones Industrial Average rose by 152 points or 0.61%. However, the Nasdaq Composite and the S&P 500 returned -0.62% and -0.17%, respectively.

Read Will Coty Stock Continue to Rally in 2020? to learn more.

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