Why Tapestry Stock Is Cooling Off Despite Coach's Hot Streak

Tapestry, Inc. (NYSE:TPR) stock declined Tuesday as analysts reassessed its valuation despite ongoing strength in the Coach brand.

Bank of America Securities analyst Lorraine Hutchinson downgraded Tapestry from Buy to Hold on Tuesday, raising the price forecast from $95 to $115.

Hutchinson observes that while the Coach brand is set to deliver several more quarters of strong growth, the stock's 66% year-to-date rally, far outpacing the S&P's 9%, has brought its valuation close to fair value.

Also Read: Coach Parent Tapestry Ups Investment In Recycled Leather Pioneer Gen Phoenix

Over the past decade, Tapestry has traded at an average P/E of 13x, ranging between 6x and 20x, and is now sitting at the upper end of that range. As a result, she has moved to a Neutral stance, despite raising the price objective.

Hutchinson also anticipates a solid fourth quarter, forecasting EPS of 98 cents, matching management's guidance, and expects 5.4% sales growth and a 16.4% operating margin, while noting that a delayed Summer Sale may have boosted late-quarter sales, likely prompting an upbeat tone on the earnings call.

Hutchinson notes that fiscal year 2026 guidance will be closely watched, with expectations for mid-single-digit sales growth and stable margins, balancing tariff-related pressures with some SG&A efficiency.

The analyst highlights that Coach continues to perform well, driven by successful marketing and premium product appeal, but doesn't foresee management forecasting double-digit growth for the brand this year.

While there's room for upside in fiscal year 2026 estimates, the analyst sees limited long-term margin expansion beyond Coach's already elevated 33.6% operating margin.

On tariffs, Hutchinson sees management can maintain profitability over time, though mitigation efforts will take a few quarters to ramp; the analyst projects a 60bp fiscal year 2026 gross margin decline from tariffs, with full recovery by fiscal year 2027, assuming initiatives scale and higher tariff rates accelerate those adjustments.

Price Action: TPR shares are trading lower by 2.35% to $107.83 at last check Tuesday.

Read Next:

• Grant Cardone Roasts Luxury Items and Recommends Real Estate Instead: ‘Birkin Bags Are Not Investments'

Image via Shutterstock