VSCO: Path To Potential Execution Risk Will Likely Limit Further Upside

Narrative Update

The analyst price target for Victoria's Secret has more than doubled from approximately $17 to about $37 per share, as analysts point to improving execution under the Path to Potential strategy, stronger brand momentum across VS and PINK, and better than expected earnings performance as key drivers of their outlook.

Analyst Commentary

Recent Street research continues to reflect a more balanced view on Victoria's Secret, with upgrades and higher price targets acknowledging operational progress while still embedding caution on the durability of the turnaround. Analysts highlight that the Path to Potential strategy, new leadership, and stronger brand engagement are driving improved execution, yet they also flag that the current share price already discounts a meaningful portion of the anticipated recovery.

Upgrades to Neutral from more negative stances and only incremental price target increases underscore that some on the Street are not yet prepared to underwrite a full growth reacceleration. They point to solid momentum in early quarters and a strong earnings beat as evidence of progress, but remain watchful for proof that recent gains can be sustained beyond the near term, particularly as the company continues to navigate shifting consumer preferences and tariff headwinds.

Goldman Sachs, for example, has moved off a Sell rating and raised its target, but still frames its stance as measured. This reflects a view that stabilization in brand momentum and market share is achievable, yet not without execution risk. Across the coverage universe, commentary suggests that while sentiment has improved from deeply negative levels, the risk reward is increasingly tied to flawless execution of the strategy and continued brand traction with core and new customers.

Several firms also note that the successful Fashion Show and increased consumer engagement online are encouraging, but must translate into sustained traffic, higher conversion, and margin expansion to justify further multiple rerating. In this context, the recent cluster of target hikes into the high 20 dollar to mid 30 dollar range is framed less as a bullish call on outsized growth and more as a recalibration to reflect a company that may be moving from structural decline toward stabilization.

Bearish Takeaways

• Bearish analysts view recent price target increases as catching up to the share price rather than signaling a new growth phase, arguing that valuation now embeds much of the early turnaround success.
• There is concern that the current momentum in brand engagement and online interest may prove short lived if product newness and marketing do not consistently translate into higher traffic and full price sell through.
• Execution risk around the Path to Potential strategy remains a key overhang, with skeptics questioning whether management can sustain earnings improvement amid tariff pressures and a highly promotional retail environment.
• Some bearish analysts caution that market share stabilization could stall, leaving limited upside to earnings estimates and constraining further multiple expansion from current levels.

What's in the News

• Jefferies reiterated its Buy rating and 35 dollar price target after attending the 2025 Fashion Show, citing encouraging strategic direction, product newness across VS and PINK, and roughly 10 million YouTube streams for the event (Jefferies note).
• Victoria's Secret issued new fourth quarter 2025 guidance, projecting net sales between 2.17 billion dollars and 2.20 billion dollars, compared with 2.106 billion dollars in the prior year period (company guidance).
• The company raised full year 2025 net sales guidance to a range of 6.45 billion dollars to 6.48 billion dollars, compared with prior guidance of 6.33 billion dollars to 6.41 billion dollars (company guidance).
• BBRC International sent a public letter to the board calling for governance changes, including removal of Board Chair Donna James and addition of a stockholder representative, and indicated it may nominate directors at the 2026 annual meeting if engagement does not improve (activist letter).
• Victoria's Secret responded to BBRC, defending its collaborative approach and highlighting performance under CEO Hillary Super, including Q2 sales and margin growth despite tariff pressures, which it attributed to the Path to Potential strategy and renewed brand leadership (company response).

Valuation Changes

• Fair Value: The estimated intrinsic value per share has risen significantly from approximately 17 dollars to roughly 37.34 dollars, more than doubling prior assumptions.
• Discount Rate: The applied discount rate has declined from about 11.96 percent to approximately 10.43 percent, indicating a modest reduction in perceived risk.
• Revenue Growth: Projected revenue growth has increased sharply from around 0.26 percent to roughly 3.39 percent, reflecting higher expectations for top line expansion.
• Net Profit Margin: The forecast net profit margin has improved from about 2.17 percent to approximately 4.52 percent, suggesting a more optimistic view on profitability.
• Future P/E: The assumed future price to earnings multiple has edged down slightly from roughly 14.77 times to about 13.38 times, implying a somewhat more conservative valuation multiple despite stronger fundamentals.