Last Update 20 Dec 25
Fair value Increased 35%CPRI: Margin Recovery And Buybacks Will Define A Cautious Path Forward
Analysts have lifted their fair value estimate for Capri Holdings to $23 from $17 per share, citing incremental target hikes and new Buy-rated coverage that highlight improved margin prospects and multiple avenues for shareholder value creation, despite tempered revenue growth expectations.
Analyst Commentary
Recent Street research reflects a mixed but generally cautious stance on Capri Holdings, with modest price target increases underscoring lingering concerns around execution risk and the durability of margin improvement. While some coverage highlights multiple avenues for shareholder value creation, the prevailing tone remains measured as the market awaits clearer evidence of a sustained turnaround.
Bearish analysts point to the gradual pace of top line recovery and ongoing competitive pressures in the premium handbag and accessories category as key reasons for restraint on valuation expansion. Incremental target hikes are framed more as calibration ahead of earnings than as a conviction call on a new growth cycle, reinforcing the view that Capri must still prove its ability to stabilize and grow its core brands.
A particular area of focus is the company’s efforts to drive a profitability recovery at Michael Kors, which is seen as critical to the broader equity story. Bearish analysts caution that merchandising missteps, wholesale normalization, and an uneven consumer backdrop could limit the speed and magnitude of margin improvement, leaving earnings forecasts vulnerable if execution falls short.
Despite the introduction of new Buy-rated coverage with a higher upside case, the valuation debate remains centered on whether Capri can consistently convert its cost and efficiency initiatives into sustainable earnings growth. Until there is clearer visibility on demand trends and brand momentum, several on the Street are inclined to treat the shares as a show-me story.
Bearish Takeaways
- Bearish analysts view recent price target increases as modest relative to historical trading ranges, suggesting limited near term rerating potential without stronger evidence of accelerating revenue growth.
- Concerns persist that a slower than expected recovery at Michael Kors could cap margin expansion, creating downside risk to earnings estimates and constraining valuation upside.
- Cautious voices highlight execution risk around inventory management and product assortment, warning that any missteps could pressure gross margins and undercut the current fair value narrative.
- Some on the Street remain wary that macro uncertainty and elevated promotional intensity in the fashion category may weigh on demand, challenging Capri’s ability to deliver consistent, profitable growth.
What's in the News
- The Board of Directors has authorized a new share buyback plan for Capri Holdings Limited, indicating confidence in the company’s valuation and balance sheet flexibility (Key Developments).
- Capri Holdings has launched a share repurchase program of up to $1 billion over three years (Key Developments).
- The company has issued earnings guidance for the third quarter of 2026, with expected revenue of approximately $975 million to $1.0 billion and diluted EPS of $0.70 to $0.80 (Key Developments).
- Full year 2026 guidance calls for total revenue of approximately $3.375 billion to $3.45 billion and diluted EPS of $1.20 to $1.40 (Key Developments).
Valuation Changes
- The fair value estimate has increased from $17.00 to $23.00 per share, reflecting higher conviction in margin improvement and capital return potential.
- The discount rate has declined slightly from 12.43 percent to 12.32 percent, signaling a modest reduction in perceived risk.
- The revenue growth assumption has deteriorated marginally from approximately minus 7.14 percent to minus 7.85 percent, indicating slightly more conservative top-line expectations.
- The net profit margin assumption has risen from about 11.68 percent to 13.88 percent, pointing to improved profitability expectations.
- The future P/E multiple has expanded from roughly 7.18x to 8.38x, implying a modest rerating of Capri Holdings’ earnings outlook.
Key Takeaways
- Shifting consumer preferences and rising competition from digital and direct-to-consumer brands threaten Capri's core offerings and compress margins.
- Economic uncertainty and sustainability pressures increase costs and risk, challenging Capri's sales growth and long-term market relevance.
- Strategic investments in digital, retail, and cost optimization, along with debt reduction, position Capri Holdings for improved growth, margins, and shareholder value.
Catalysts
About Capri Holdings- Engages in the design, marketing, distribution, and retail of branded women’s and men’s apparel, footwear, and accessories in the United States, Canada, Latin America, Europe, the Middle East, Africa, Asia, and the Oceania.
- Ongoing economic uncertainty and a potential slowdown in global growth, combined with rising inequality, is likely to erode demand for accessible luxury, particularly in Capri Holdings' key segments and mature markets, leading to sustained pressure on overall sales volumes and revenue growth.
- Accelerating consumer preference for experiences over material goods, especially among younger generations, threatens the long-term relevance of traditional designer accessories and apparel-the cornerstone of Capri's offering-resulting in weaker volume growth and increased inventory risk.
- The persistent rise of digital-native direct-to-consumer and secondhand luxury platforms is shrinking the pricing power and brand cachet of legacy players like Capri, especially as the company struggles to fully transform its digital and omnichannel presence, which will likely compress gross and operating margins over time.
- Heightened regulatory and consumer scrutiny around sustainability and ethical sourcing continues to increase compliance costs and potential reputational risk, forcing Capri to absorb higher expenses in its supply chain and potentially weakening net earnings and margin expansion efforts.
- Increasing competitive pressure from agile direct-to-consumer luxury brands and advances in counterfeit goods are expected to erode Capri's market share, while the company's inconsistent international expansion and store rationalization could stall revenue momentum and jeopardize long-term earnings growth.
Capri Holdings Future Earnings and Revenue Growth
Assumptions
How have these above catalysts been quantified?- This narrative explores a more pessimistic perspective on Capri Holdings compared to the consensus, based on a Fair Value that aligns with the bearish cohort of analysts.
- The bearish analysts are assuming Capri Holdings's revenue will decrease by 7.1% annually over the next 3 years.
- The bearish analysts assume that profit margins will increase from -25.7% today to 11.7% in 3 years time.
- The bearish analysts expect earnings to reach $410.7 million (and earnings per share of $3.77) by about September 2028, up from $-1.1 billion today. The analysts are largely in agreement about this estimate.
- In order for the above numbers to justify the price target of the more bearish analyst cohort, the company would need to trade at a PE ratio of 7.2x on those 2028 earnings, up from -2.3x today. This future PE is lower than the current PE for the US Luxury industry at 20.5x.
- Analysts expect the number of shares outstanding to grow by 0.98% per year for the next 3 years.
- To value all of this in today's terms, we will use a discount rate of 12.43%, as per the Simply Wall St company report.
Capri Holdings Future Earnings Per Share Growth
Risks
What could happen that would invalidate this narrative?- Capri Holdings is seeing sequential improvements in both revenue and earnings at Michael Kors and Jimmy Choo, alongside rising average unit retail prices and stronger full-price sell-throughs, suggesting that successful strategic initiatives could drive a return to top-line and EPS growth in the coming years.
- The company is investing heavily in data analytics, digital marketing, direct-to-consumer channels, and influencer partnerships, which have yielded a 9% year-over-year increase in both Michael Kors' and Jimmy Choo's global consumer databases, potentially supporting sustained revenue growth and higher profit margins.
- Ongoing fleet optimization, including store renovations covering approximately 50% of the store fleet in the next three years and the introduction of experiential retail concepts, is showing early signs of boosting store productivity, which could elevate revenue per store and long-term operating margins.
- Capri's structured approach to mitigate tariff headwinds through diversified sourcing, cost efficiencies with manufacturing partners, and targeted price increases is expected to largely offset increased costs by fiscal 2027, supporting the potential for gross margin expansion and healthier net earnings.
- Proceeds from the anticipated Versace sale will be used to significantly reduce debt and free up capital for strategic investments in the core brands, putting Capri Holdings in a stronger financial position to fuel growth initiatives and improve free cash flow, which could ultimately increase shareholder value and share price.
Valuation
How have all the factors above been brought together to estimate a fair value?- The assumed bearish price target for Capri Holdings is $17.0, which represents the lowest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of Capri Holdings's future earnings growth, profit margins and other risk factors from analysts on the more bearish end of the spectrum.
- However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $45.0, and the most bearish reporting a price target of just $17.0.
- In order for you to agree with the bearish analysts, you'd need to believe that by 2028, revenues will be $3.5 billion, earnings will come to $410.7 million, and it would be trading on a PE ratio of 7.2x, assuming you use a discount rate of 12.4%.
- Given the current share price of $21.76, the bearish analyst price target of $17.0 is 28.0% lower. Despite analysts expecting the underlying buisness to improve, they seem to believe the market's expectations are too high.
- We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.
Have other thoughts on Capri Holdings?
Create your own narrative on this stock, and estimate its Fair Value using our Valuator tool.
Create NarrativeHow well do narratives help inform your perspective?
Disclaimer
AnalystLowTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystLowTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystLowTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.
