AVY: Recent Upgrade And Buybacks Will Support Balanced Risk Reward Profile

Analysts have modestly raised their price target on Avery Dennison to $200.00. This reflects slightly improved long term growth and profitability assumptions that support a more constructive view on the shares.

Analyst Commentary

Recent Street research reflects a more constructive stance on Avery Dennison, with bullish analysts citing an improved risk reward profile at current levels. The upgraded valuation framework embeds expectations for steady margin expansion and consistent free cash flow generation as key drivers of upside toward the new price target.

Commentary focuses on the company’s ability to execute on its strategic priorities while navigating a still mixed macro environment. Analysts are weighing the durability of demand in core labeling and materials markets against execution on cost efficiency initiatives and capital allocation discipline.

Bullish Takeaways

• Bullish analysts point to improving end market trends and operating leverage as support for sustained earnings growth, which they view as not fully reflected in the current valuation.
• Confidence in management’s execution on productivity and pricing initiatives underpins expectations for gradual margin expansion and stronger return on invested capital.
• Steady free cash flow generation and a balanced capital allocation strategy, including dividends and buybacks, are seen as enhancing the stock’s total return potential.
• Relative to peers, Avery Dennison is viewed as a high quality compounder with defensible market positions, which some analysts see as supporting a premium multiple if long term growth normalizes at or above industry levels.

Bearish Takeaways

• Bearish analysts caution that the upgraded target leaves a narrower margin of safety if macro conditions weaken or if volume recovery in key segments falls short of expectations.
• There is concern that further margin gains could be harder to achieve if input cost volatility returns or pricing power moderates, which could limit upside to earnings estimates.
• Execution risk around ongoing investments and portfolio initiatives could weigh on near term profitability, which in turn could challenge the justification for a higher valuation multiple.
• Some remain wary that the stock’s re rating potential could be constrained if growth remains closely tied to cyclical industrial and consumer activity rather than higher growth adjacencies.

What's in the News

• Walmart and Avery Dennison launched a first of its kind RFID sensor solution for high moisture, cold fresh food environments, enabling faster, more accurate inventory tracking and supporting Walmart's 2030 food waste reduction goals (Client Announcements).
• Avery Dennison's RFID enabled labels are being deployed across Walmart's meat, bakery and deli departments, giving associates digital use by dates to optimize rotation and markdowns while improving on shelf availability (Client Announcements).
• From June 29, 2025 to September 27, 2025, Avery Dennison repurchased 547,600 shares for $92.81 million, completing a 605,710 share buyback totaling $103.13 million under the April 28, 2025 authorization (Buyback Tranche Update).
• The company issued fourth quarter 2025 guidance, targeting earnings per share of $2.15 to $2.25 and reported sales growth of 5% to 7% (Corporate Guidance).

Valuation Changes

• Fair Value: Unchanged at approximately $202.36 per share, indicating no material shift in the intrinsic valuation outcome.
• Discount Rate: Fallen slightly from about 7.14 percent to 7.13 percent, reflecting a modestly lower assumed cost of capital.
• Revenue Growth: Risen marginally from around 4.71 percent to 4.72 percent, signaling a very small uptick in long term sales growth expectations.
• Net Profit Margin: Increased slightly from roughly 9.11 percent to 9.12 percent, suggesting a modest improvement in long term profitability assumptions.
• Future P/E: Edged down marginally from about 19.54 times to 19.53 times, implying a nearly stable valuation multiple applied to forward earnings.