Morgan Stanley Sees Potential in Victoria’s Secret’s (NYSE: VSCO) New Chapter

Victoria's Secret stock price (NYSE: VSCO) surged by 16.40% to a current price of $22.20 as the famed intimate apparel retailer received an optimistic outlook from Morgan Stanley following a significant shakeup in its leadership.

The appointment of new CEO Hillary Super alongside a positive second quarter beat in 2024 has rejuvenated hopes for a turnaround, compelling Morgan Stanley to adjust its perspective on the stock and signalling a potential new era for the company.

Morgan Stanley upgraded Victoria's Secret from Underweight to Equal Weight, with a new price target set at $20, up from the prior $14. Analysts note that the CEO transition sets in motion renewed hopes for corporate revitalization, particularly as the company delivered a solid Q2 which sets an “achievable second half of 2024 bar.”

The firm suggests that the new leadership likely means any near-term “shortcomings” will be overlooked as the market grants Victoria's Secret “the benefit of the doubt.”

The retail major's recent performance has evidently convinced analysts that despite retail turnarounds being historically challenging, there's a case to be made for a more forgiving approach when it comes to the company's immediate future.

Victoria's Secret, with its headquarters in Reynoldsburg, Ohio, competes in the crowded consumer cyclical sector, specifically within apparel retail. The company, which operates as a specialty retailer of women's intimate and other apparels along with beauty products, has demonstrated a significant global presence, offering its merchandise through various retail stores, dedicated websites, and digital channels. Notably, the company has emerged as a pivotal player under the Victoria's Secret, PINK, and Adore Me brands.

As of the latest disclosed information, Victoria's Secret has a market capitalisation of $1.74 billion, with a 52-week range oscillating between $13.62 and $30.80.

Financially, Victoria's Secret reports a trailing P/E ratio of 16.66 and a forward P/E ratio of 10.86, indicative of expected earnings growth. While the company does not issue dividends, its noteworthy total revenue stands at over $6.13 billion with a net income to common shares amounting to $104 million.

Despite bearing the inherent complexities of retail turnarounds, Victoria's Secret looks to be granted a period of leniency as it attempts to pivot under the guidance of Hillary Super. Morgan Stanley's upgraded stance resonates with a sentiment that though the road ahead may be fraught with challenges, the iconic retailer might be on the precipice of writing a new chapter in its storied history.