Coty faces tough times as Deutsche Bank downgrades shares

In the United States, on May 8, 2025, Deutsche Bank analyst Steve Powers made a significant downgrade of Coty’s shares from buy to hold. This decision was prompted by the company's fiscal third-quarter earnings, which fell short of expectations. Along with the downgrade, Coty also revised its full-year earnings guidance downward and anticipates a mid-single-digit decline in reported sales. These challenges have been attributed to foreign exchange headwinds impacting the business. Analyst Powers cited that the outlook for Coty is becoming increasingly concerning, with slower growth trends, particularly in the U.S. market. The ongoing concerns regarding tariffs were also noted, with Powers estimating that they could result in a financial hit of around $100 million or more, significantly affecting Coty's prestige fragrances segment, which is critical for their brand identity and revenue streams. Despite these challenges, the analyst pointed out that while Coty is addressing the right initiatives in a tough operating environment, the downgrade reflects increasing uncertainty about achieving long-term financial targets. The company faces a tough road ahead, especially with approximately $1.1 billion of debt maturities due in the calendar year 2026. Powers also made it clear that there are potential upsides, depending on macroeconomic improvements and the company's ability to capitalize on its Wella stake, theoretically valued at $1 billion, but he emphasized that these factors remain largely beyond Coty’s control. As a result of the downgrade and the company's financial setbacks, shares of Coty were down nearly 12% shortly after the report was published. Year-to-date, the stock has experienced a drop of more than 33%. Analysts seem divided on Coty’s future, with 10 out of 20 analysts maintaining a buy or strong buy rating, while eight analysts categorize it as a hold and the remaining two give it an underperform rating. These mixed ratings highlight the uncertainty surrounding Coty's market position, further complicating the outlook for the company in the near future.