Tapestry: A Hidden Gem in the Luxury Stock Market

Tapestry, Inc. (NYSE:TPR) has been making waves in the luxury goods industry, with its diverse brand portfolio and strategic acquisitions. As of December 30, 2024, Tapestry's stock price is $65.87 USD, with a market capitalization of $153.5 billion. The company's forward P/E ratio is 13.06, indicating that investors are pricing in the company's growth prospects and the potential impact of its pricing strategy on future earnings. But is Tapestry the top luxury stock according to hedge funds? Let's dive into the data and find out.



TPR formed its 52-week lows at about the $35 level but then surged and formed its 52-week highs at the $66 level. As such, Tapestry has shown significant price appreciation over the past year, making it an attractive investment for hedge funds.

Tapestry's brand portfolio, which includes Coach, Kate Spade, and Stuart Weitzman, contributes to its appeal among hedge funds due to several factors:

1. Strong brand recognition: Each of these brands has a strong global presence and is well-known for its luxury products. This recognition makes these brands attractive to consumers and investors alike.
2. Diversification: Having three distinct brands allows Tapestry to cater to a wider range of consumer preferences and market segments. This diversification can help mitigate risk and ensure consistent revenue streams.
3. Synergies and cost savings: Owning multiple brands allows Tapestry to leverage synergies and achieve cost savings by sharing resources like distribution channels, manufacturing facilities, and marketing efforts. This can result in improved profitability and increased shareholder value.
4. Growth potential: Each brand in Tapestry's portfolio has its own growth potential. For example, Kate Spade has shown strong growth in recent years, with revenue increasing by 11% in the fiscal year 2021 compared to the previous year. This growth potential can attract hedge funds looking for companies with strong upside.
5. Analyst recommendations: As mentioned in the materials, 19 analysts have given Tapestry a "buy" recommendation, indicating that they believe the company's stock is undervalued and has significant upside potential. This positive sentiment from analysts can influence hedge funds' decisions to invest in Tapestry.

Tapestry's strategic acquisitions and partnerships have also played a significant role in its attractiveness to hedge funds. By expanding its brand portfolio and entering new markets, Tapestry has been able to diversify its revenue streams and tap into new growth opportunities. For example, the acquisition of Kate Spade and Stuart Weitzman allowed Tapestry to tap into the growing demand for luxury accessories and footwear, making it an attractive investment for hedge funds.

Tapestry's pricing strategy and product positioning within the luxury market also impact its valuation and appeal to hedge funds. The company's brands are well-established and have a strong reputation in the luxury goods sector. For example, Coach is known for its high-quality leather goods, while Kate Spade is recognized for its colorful and playful designs. Stuart Weitzman is a leading brand in luxury footwear. These brands cater to different segments of the luxury market, allowing Tapestry to maintain a diverse customer base and mitigate risks associated with relying on a single brand.

Tapestry's revenue growth and earnings per share (EPS) have also been a factor in its appeal to hedge funds. While Tapestry's revenue growth of -0.004 is lower than the growth rates of other luxury stocks like LVMH, Kering, and Estée Lauder, its EPS of 3.45 is still competitive within the industry. Additionally, Tapestry's forward EPS of 4.76 indicates that the company has strong growth potential in the coming years.

Tapestry's price-to-earnings (P/E) ratio is 19.092754, which is relatively lower than some of its competitors, such as LVMH and Kering, but it is similar to Estée Lauder Companies and higher than Ralph Lauren. This suggests that Tapestry may be undervalued compared to some of its peers in the luxury industry.

In conclusion, Tapestry's brand portfolio, strategic acquisitions and partnerships, pricing strategy, and product positioning within the luxury market make it an attractive investment for hedge funds. While Tapestry's revenue growth may not be as strong as some of its competitors, its EPS and forward EPS indicate that the company has strong growth potential. Additionally, Tapestry's P/E ratio suggests that the company may be undervalued compared to some of its peers in the luxury industry. As such, Tapestry is a strong contender for the title of top luxury stock according to hedge funds.

Rating: Buy (Reiterated).