Raymond James cuts Capri Holdings stock price target on tariff impact

Raymond James cut Capri Holdings' price target to $22 from $24 but kept an Outperform rating, citing improving fundamentals, full-price comparable sales growth at Michael Kors, and strong 62% gross margins. Capri beat fiscal Q4 2026 EPS at $0.22 versus $0.11 expected and revenue came in at $796 million, though the stock remains down 28% over six months and the firm still sees some tariff-related and channel headwinds. The analyst expects results to track guidance with better momentum in the second half of fiscal 2027 as those headwinds ease.

Analysis

The setup is less about a single quarter and more about the market’s willingness to underwrite a multi-year margin normalization story before the operating clean-up is fully visible. A sub-1x PEG on paper is only meaningful if management can keep converting mix, pricing, and international expansion into gross margin stability while the channel/Daigou unwind doesn’t simply reappear elsewhere in the value chain. The key second-order effect is that a tighter wholesale and outlet posture can support brand equity, but it also creates near-term revenue friction that the market will keep penalizing until comp durability becomes obvious.

What matters next is the slope of revisions, not the absolute level of guidance. If fiscal 2027 EBIT margin guidance is already above Street and the stock still trades at a discount to its own history, the market is effectively saying it needs one more proof point: either sustained full-price momentum into the holiday build or evidence that Europe/Asia can offset North America softness. That makes the next 1-2 earnings prints the real catalyst window; absent continued beat-and-raise behavior, the rerating could stall even if fundamentals are improving underneath.

The contrarian read is that consensus may be too focused on the headline multiple and not enough on the quality of earnings recovery. If gross margin remains near current levels while AUR and international mix improve, this becomes a slower but sturdier compounding story; if not, the valuation cheapness is a trap because the earnings base is still too dependent on self-help rather than demand creation. On balance, the risk/reward favors owning the stock into the next two quarters, but only with a defined exit if revenue momentum softens or if management signals that 2H27 relief is slipping beyond that window.

Key Decisions for Investors

• Long CPRI over the next 2-3 quarters on the thesis that margin-led revisions continue to outpace muted top-line expectations; target a 15-20% rerating toward historical P/E norms if execution holds, with a stop if comps or AUR decelerate for two consecutive prints.
• Use December/January call spreads on CPRI rather than outright stock if you want convexity into the next earnings cycle; the trade works best if the market starts pricing a cleaner 2H27 margin inflection before evidence is fully visible.
• Pair long CPRI vs. a lower-quality apparel/luxury peer with more wholesale exposure and weaker gross margin resilience; the relative trade should benefit if the market rewards cleaner inventory and pricing discipline over simply faster revenue growth.
• If entering common equity, size for a 6-9 month horizon and trim into strength after the next beat, because the upside case is likely to be realized through gradual estimate revisions rather than a single sharp re-rating.