We came across a bullish thesis on Victoria’s Secret & Co. (VSCO) on Substack by Nishant Chandra. In this article, we will summarize the bulls’ thesis on VSCO. Victoria’s Secret & Co. (VSCO)’s share was trading at $37.10 as of Jan 17th. VSCO’s trailing and forward P/E were 18.93 and 14.01 respectively according to Yahoo Finance.
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Victoria’s Secret, a longstanding leader in the women’s lingerie and intimates market, has faced significant challenges in recent years. After reaching a peak of $74 per share, the stock has declined sharply, falling to as low as $16 before stabilizing around $27. Despite this decline, there is notable upside potential for the company. A discounted cash flow (DCF) analysis reveals that Victoria’s Secret is undervalued, with an estimated enterprise value of $4.1 billion—nearly double its current market capitalization of approximately $2.1 billion. This calculation is based on conservative assumptions, including a 2% annual growth rate and a 6% free cash flow margin, suggesting that the stock is undervalued relative to its fundamentals.
While Victoria’s Secret faces challenges, including a $2.4 billion debt load as of July 2024, the company is poised for a potential turnaround under the leadership of its new CEO, Hillary Super, who took the helm in September 2024. Super, previously at Fenty, brings strategic experience in capturing market share from competitors like Victoria’s Secret, which could act as a catalyst for growth. The company still holds 20% of the North American intimates market and maintains strong brand recognition across generations.
Victoria’s Secret is also implementing strategies to modernize its image, focusing on diversity, inclusivity, and collaborations with creators, while reintroducing the iconic Victoria’s Secret Fashion Show. These efforts, combined with debt reduction and a focus on profitability, position the company for future growth.
Victoria’s Secret & Co. (VSCO) is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 27 hedge fund portfolios held VSCO at the end of the third quarter which was 30 in the previous quarter. While we acknowledge the risk and potential of VSCO as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than VSCO but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article was originally published at Insider Monkey.