Bank of America Downgrades Tapestry to Neutral on Valuation Concerns

Tapestry shares have dipped 2.4% after Bank of America downgraded the stock to "Neutral" due to valuation concerns. The bank cited the stock's 66% surge this year, pushing shares near fair value, and a forward price-to-earnings multiple of 20x, up from its historical average of 13x. Analysts expect Tapestry to issue fiscal 2026 guidance with mid-single-digit sales growth and flat margins, reflecting near-term pressure from tariffs. Despite this, BofA expects a strong fourth quarter for Tapestry.

Tapestry Inc (NYSE:TPR) has seen a notable 2.4% drop in its stock price following a downgrade from "Buy" to "Neutral" by Bank of America (BofA) [1]. The decision was based on valuation concerns, as the stock has surged by 66% so far this year, pushing it near fair value. The forward price-to-earnings multiple has risen to 20x, up from its historical average of 13x [1].

The analysts at BofA maintained confidence in Tapestry's growth momentum, particularly at its flagship Coach brand. However, they noted that the recent rally has brought the stock price near its fair value, leaving limited upside potential. Despite this, BofA expects a strong fourth quarter for Tapestry, with upbeat commentary on Coach's performance and potential upside to fiscal 2026 estimates [1].

Looking ahead, Tapestry is expected to issue fiscal 2026 guidance calling for mid-single-digit sales growth and flat margins. This reflects near-term pressure from tariffs, which are anticipated to weigh on gross margins by 60 basis points. The company has laid out mitigation strategies to offset the impact of new tariffs, but BofA noted that some of these efforts will take time [1].

The stock's recent performance has pushed it to the top of its 10-year valuation range. Tapestry's current forward price-to-earnings multiple of 20x is significantly higher than its historical average of 13x. This indicates that the stock is trading at a premium relative to its historical valuation [1].

Despite the downgrade, BofA expects a strong fourth quarter for Tapestry. The bank's analysts noted that Coach's performance is expected to outperform in the coming quarters, but double-digit sales growth next year looks unlikely due to the short-term impact of tariffs. The company has been working on cost-cutting measures to mitigate the effects of tariffs, but these efforts will take time to show significant results [1].

The stock's price drop follows a period of strong performance, with Tapestry's stock surging 66% so far this year. The recent rally has pushed the stock price to the upper end of its ten-year price-to-earnings band, leading to the downgrade by BofA [1].

Institutional investors and hedge funds have been active in trading Tapestry's shares. Several institutions have increased their holdings in the company, reflecting their confidence in its long-term prospects. However, the recent downgrade by BofA may lead to a correction in the stock price as investors adjust their expectations [2].

Tapestry's strong performance and growth prospects have been recognized by other analysts as well. Goldman Sachs, UBS, Citigroup, Raymond James Financial, and Telsey Advisory Group have all issued positive ratings and price targets for the company [2].

In conclusion, Tapestry's stock has seen a significant drop following a downgrade by BofA due to valuation concerns. The company's strong growth momentum and performance at the Coach brand have been recognized, but the recent rally has pushed the stock price near fair value. The near-term impact of tariffs may weigh on profit margins, but the company is working on mitigation strategies. Investors should continue to monitor Tapestry's performance and guidance for further updates.

References:
[1] https://www.proactiveinvestors.com/companies/news/1075665/tapestry-shares-dip-after-bofa-downgrades-stock-on-valuation-concerns-1075665.html
[2] https://www.marketbeat.com/instant-alerts/tapestry-nysetpr-stock-rating-lowered-by-bank-of-america-2025-07-29/