Last Update 08 Jan 26

Fair value Decreased 5.59%

COTY: Proprietary Capabilities Will Counter Gucci License Loss Over Time

The analyst price target for Coty has been trimmed to US$4 from US$4.83, as analysts factor in a slightly lower fair value, modestly softer revenue growth assumptions, and the future loss of the Gucci Beauty license. This is partly offset by marginally higher projected profit margins and a lower future P/E multiple.

Analyst Commentary

Recent Street research highlights both opportunities and risks for Coty as it adjusts to the changing beauty licensing backdrop and a lower price target of US$4.

Bullish Takeaways

Bullish analysts see room for Coty to build more proprietary formulations and brands, which could make earnings less dependent on third party licenses over time.
There is an emphasis on developing vertical capabilities that are harder for competitors to replicate. If executed well, this could support margins and brand equity.
The revised US$4 price target and Hold ratings suggest that, at current levels around US$4.24, some of the Gucci license risk is already reflected in valuation.
Stronger in house capabilities may give Coty more control over product pipelines and pricing, which could help support profit margins that underpin the current P/E assumptions.

Bearish Takeaways

Bearish analysts flag the loss of the Gucci Beauty license in 2028 as a material headwind, with an estimated US$550m brand exiting a portfolio that is already heavily reliant on fragrance.
The shift of Gucci and other licenses to a major competitor raises execution risk for Coty, as it must replace a sizeable revenue contributor while maintaining scale with retailers.
With the stock trading near US$4.24 and price targets clustered at US$4, there is limited implied upside in current models. This reflects concerns around growth visibility after the license transition.
The need to accelerate proprietary brand building and vertical capabilities could require sustained investment, which may weigh on near term profitability if not tightly managed.

What’s in the News

Markus Strobel will become Interim CEO on January 1, 2026, after a 33 year career at Procter & Gamble, where he most recently led the Global Skin & Personal Care business with more than 12 global brands, and previously worked across fine fragrance, hair care, grooming and several prestige fragrance labels (Key Developments).
Strobel succeeds Sue Nabi, who steps down after five years as CEO. This period included launches such as Burberry Goddess and a reduction of Coty’s financial net leverage to about 3x (Key Developments).
Coty issued guidance for Q2 and the second half of FY26, expecting Q2 like for like sales to be at the more favorable end of a 3% to 5% decline range. The company anticipates a gradual improvement in sales trends over FY26, with like for like sales returning to growth in 2H26, and adjusted EBITDA for Q2 declining by a low to mid teens percentage, in line with prior guidance (Key Developments).
For Q2 FY26 reported revenue, Coty estimates a low to mid single digit FX benefit and points to several planned Prestige launches and more comparable periods as support for its 2H26 outlook (Key Developments).
From July 1, 2025 to September 30, 2025, Coty repurchased no shares, while total completed buybacks under the February 4, 2016 program stand at 3,933,694 shares, or 1.16%, for US$104.65m (Key Developments).

Valuation Changes

Fair Value: Trimmed slightly from US$4.83 to US$4.56, aligning the model more closely with updated assumptions.
Discount Rate: Essentially unchanged, moving marginally from 10.50% to 10.50%, which suggests a similar view of Coty’s risk profile.
Revenue Growth: Assumed long term growth softened from 2.17% to 1.96%, reflecting a more cautious stance on future sales expansion.
Net Profit Margin: Edged up from 5.36% to 5.48%, which points to modestly higher expected profitability on each dollar of revenue.
Future P/E: Adjusted down from 17.34x to 16.12x, indicating a slightly lower valuation multiple applied to projected earnings.

Innovation in fragrances and expansion into new categories, supported by strategic digital initiatives, are expected to drive revenue growth and sustained high profitability.
Strength in China, premiumization, and effective revenue management position the company to grow margins and capture emerging market opportunities despite increased competition.
Persistent inventory and sector headwinds, intense competition, reliance on key brands, weak Asian travel retail, and high debt levels threaten growth, profitability, and financial flexibility.

Catalysts

About Coty

Manufactures, markets, distributes, and sells branded beauty products worldwide.What are the underlying business or industry changes driving this perspective?

The imminent end of retailer inventory destocking by late 2025 is expected to eliminate a major headwind, allowing Coty's sell-in to realign with strong underlying consumer sell-out trends, especially in prestige and mass fragrances, which should drive a return to top-line growth and EBITDA expansion in the second half of fiscal 2026.
Innovation-led launches-including blockbusters such as HUGO BOSS Bottled Beyond, additional high-profile fragrance releases, and an aggressive expansion into the rapidly growing body/ perfume mist category-are set to benefit from the surging demand for prestige scenting products across diverse demographics, supporting revenue gains and sustaining high profitability.
Accelerating growth in China and premiumization globally, particularly the outperformance of the Lancaster skincare brand (+40% vs. the market) and enhanced e-commerce penetration, positions Coty to capture the ongoing rise in middle class consumption and shifting beauty routines in emerging markets, underpinning both revenue and margin improvements.
Strategic revenue management, including disciplined promotional activity, differentiated product formats (like pen sprays and body mists), and portfolio focus on core prestige and mass brands, is designed to defend pricing power, maintain gross margins, and support net margin expansion despite a more competitive market environment.
Ongoing digital initiatives and category innovations (e.g., AI-driven personalization, broadened direct-to-consumer channels, simplified routines for loyal consumers) are aligned with enduring shifts toward e-commerce and digital engagement, poised to improve both top-line growth and customer retention while enhancing long-term earnings and cash flow.

Coty Future Earnings and Revenue Growth

Assumptions

How have these above catalysts been quantified?

Analysts are assuming Coty's revenue will grow by 1.3% annually over the next 3 years.
Analysts assume that profit margins will increase from -6.5% today to 4.9% in 3 years time.
Analysts expect earnings to reach $302.1 million (and earnings per share of $0.38) by about September 2028, up from $-381.1 million today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting $347 million in earnings, and the most bearish expecting $250.3 million.
In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 18.9x on those 2028 earnings, up from -9.7x today. This future PE is lower than the current PE for the US Personal Products industry at 22.8x.
Analysts expect the number of shares outstanding to grow by 0.28% per year for the next 3 years.
To value all of this in today's terms, we will use a discount rate of 10.41%, as per the Simply Wall St company report.

Coty Future Earnings Per Share Growth

Risks

What could happen that would invalidate this narrative?

Persistent inventory destocking, particularly in the U.S., is expected to weigh on top-line growth and create volatility through fiscal 2025, with management only projecting a return to balanced sell-in and sell-out late into fiscal 2026; prolonged headwinds here could pressure short
and medium-term revenues and delay margin recovery.
High promotional activity and intensifying competition in both mass and prestige beauty segments, exacerbated by innovation fatigue and simplified routines among consumers, could erode brand equity, put downward pressure on pricing, and compress Coty's net margins and profitability if not managed effectively.
Reliance on blockbusters, celebrity, and licensed brands (such as HUGO BOSS and CK), along with shifting marketing investments, introduces risk of volatility in revenue streams and EBITDA if these partnerships lose relevance, consumer preferences shift, or licenses expire.
The ongoing sector weakness in Asian travel retail, especially linked to Chinese demand, presents a continued drag on prestige product sales and regional revenues; delayed recovery or further downturns in this channel could limit Coty's growth in important markets.
High debt levels and the need for refinancing and deleveraging remain structural concerns, potentially limiting capacity for innovation, digital investments, or weathering downturns; elevated financial leverage could pressure earnings if cash flow growth or planned asset disposals (such as the Wella stake) fall short of expectations.

Valuation

How have all the factors above been brought together to estimate a fair value?

The analysts have a consensus price target of $4.825 for Coty based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $8.0, and the most bearish reporting a price target of just $3.5.
In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $6.1 billion, earnings will come to $302.1 million, and it would be trading on a PE ratio of 18.9x, assuming you use a discount rate of 10.4%.
Given the current share price of $4.25, the analyst price target of $4.82 is 11.9% higher.
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.

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Disclaimer

AnalystConsensusTarget 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 AnalystConsensusTarget 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 AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.

Easing Destocking And Premium Demand Will Drive Global Expansion