Coty Rally on Pause as Wells Fargo Doubts Story

By Christiana Sciaudone

Investing.com —  Coty (NYSE:COTY) is finally taking a break from its weeks-long rally.

Shares are down over 5% after Wells Fargo (NYSE:WFC) downgraded the stock, which had risen more than 130% since the start of November.

Following that sharp surge in the stock price, Coty is now expensive compared to its history and the broader market, according to analyst Chris Carey, who lowered the stock to a sell-equivalent from a hold-equivalent, with a price target of $5, higher than the original $4, according to The Fly.

Carey’s not convinced that positive signs on margins will continue, saying he has seen this before and doesn’t have clarity on the sustainability of the company’s results that would justify a premium relative to those who have “much better” fundamental visibility ahead.

Sue Y. Nabi, a veteran of the beauty business, joined as chief executive officer this year and has been busy overhauling the executive suite with her handpicked choices. 

Last month, the company reported a loss per share that wasn’t as bad as expected, and managed to more than double revenue from the previous quarter. Coty recently sold off a stake in Wella to KKR, netting cash proceeds of about $2.5 billion.