Shares of beauty retailer Bath & Body Works (BBWI) are up 8% after a leading analyst at JPMorgan Chase (JPM) upgraded the stock.
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Matthew Boss, a well-known retail analyst, has lifted his rating on BBWI stock to a Buy-equivalent overweight from neutral previously. He also raised his price target on the shares to $47 from $41, which implies a potential gain of nearly 30% from current levels.
According to Boss, Bath & Body Works is likely to achieve a fundamental inflection point in 2025 following a difficult three years for the company and its shareholders. Bath & Body Works has “consistent opportunities within adjacencies or through collaborations,” as well as “expanding high-teens operating margins, and visible shareholder returns,” Boss wrote in a note to clients.
Share Price Erosion
BBWI stock has declined 25% over the last three years amid a prolonged downturn for the entire beauty industry. However, the shares have now likely bottomed and Bath & Body Works should recover this year helped by strong free cash flow. Boss notes that current free cash flow supports about $1.7 billion in share repurchases from the company in 2025 and 2026.
Combined with a 2% dividend yield, and BBWI shareholders can earn a 9% return from Bath & Body Works capital allocation alone, notes the analyst. BBWI stock is also trading at a cheap valuation compared to the broader market with a price-earnings (P/E) ratio of 9.64. Even with today’s big jump, shares of Bath & Body Works are down 6% on the year.
Is BBWI Stock a Buy?
The stock of Bath & Body Works has a consensus Moderate Buy rating among 14 Wall Street analysts. That rating is based on eight Buy, five Hold, and one Sell recommendations issued in the last three months. The average BBWI price target of $44.69 implies 13.37% upside from current levels.
