L Brands Inc. (LB) Volatility Spurs A Quest For Clarity

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Melvin Capital Management LP recently announced the acquisition of new stake in L Brands Inc. (NYSE:LB). The institutional investor has increased its shareholding in the Consumer Cyclical company by 113.09% to 27.7 million shares with purchase of 14.7 million shares. This fresh investment now brings its stake to 9.97% valued currently at $676.19 million. In addition, Egerton Capital (UK) LLP raised its holdings by 0.98 million to 8.65 million shares. And Candlestick Capital Management LP has lifted its position by 7.59% or 0.41 million shares – to 5.83 million shares.

With over 6.29 million L Brands Inc. (LB) shares trading Friday and a closing price of $29.97 on the day, the dollar volume was approximately $188.53 million. The shares have shown a positive weekly performance of 12.92% and its price on 08/21/20 gained nearly 1.35%. Currently, there are 277.00M common shares owned by the public and among those 228.24M shares have been available to trade.

An analysis of what Wall Street brokers have to say about the expected price targets for this stock gives us this picture: 28 analysts who have offered their price forecasts for LB have a consensus price objective of $29.88. The analysts have set the share’s price value over the next 12 months at a high of $40.00 and a low of $15.00 should the stock experience a downside. Incidentally, analysts’ outlook for the L Brands Inc. stock is 2.90 for the next 12 months. The average price target is -15.62% below its last price level and a downside to the estimated low will see the stock lose -99.8% over that period. But an upside of 25.08% will see the stock hit the forecast high price target while mean target price for the stock is $31.00.

Insiders at the company have transacted a total of 24 times over the past 12 months, according to data filed with the U.S. Securities and Exchange Commission (SEC). 14 of these insider trades were purchases, accounting for 226,330 shares. Insider sales of the common stock occurred on 10 occasions, with total insider shares sold totaling 38,146 shares.

The top 3 mutual fund holders in L Brands Inc. are Vanguard PRIMECAP Fund, Vanguard Total Stock Market Index, and Vanguard Small Cap Index Fund. Vanguard PRIMECAP Fund owns 9.01 million shares of the company’s stock, all valued at over $220.01 million. The company sold -0.54 million shares recently to bring their total holdings to about 3.24% of the shares outstanding. Vanguard Total Stock Market Index sold 43764.0 shares to see its total holdings shrink to 6.29 million shares valued at over $153.55 million and representing 2.26% of the shares outstanding. Vanguard Small Cap Index Fund sold 41020.0 shares to bring its total holdings to over 5.49 million shares at a value of $134.1 million. Vanguard Small Cap Index Fund now owns shares totaling to 1.98% of the shares outstanding.

Shares of L Brands Inc. (NYSE: LB) opened at $29.83, up $0.26 from a prior closing price of $29.57. However, the script later closed the day at $29.97, up 1.35%. The company’s stock has a 5-day price change of 12.92% and 98.74% over the past three months. LB shares are trading 65.40% year to date (YTD), with the 12-month market performance up to 55.04% higher. It has a 12-month low price of $8.00 and touched a high of $31.33 over the same period. Currently, 6.29 million shares have been traded, compared to an average intraday trading volume of 7.91 million shares. The stock is trading above its simple moving averages at the SMA20, SMA50, and SMA200, as the current price level is off by 18.00%, 51.41%, and 68.01% respectively.

Institutional ownership of L Brands Inc. (NYSE: LB) shares accounts for 81.60% of the company’s 277.00M shares outstanding. Mutual fund holders own 32.85%, while other institutional holders and individual stakeholders account for 48.14% and 17.40% respectively.

It has a market capitalization of $8.22B and a beta (3y monthly) value of 1.63. The earnings-per-share (ttm) stands at -$2.86. Price movements for the stock have been influenced by the stock’s volatility, which stands at 6.19% over the week and 4.60% over the month.

Analysts forecast that L Brands Inc. (LB) will achieve an EPS of -$0.01 for the current quarter, $1.82 for the next quarter and $2.02 for 2022. The lowest estimate earnings-per-share for the quarter is -$0.34 while analysts give the company a high EPS estimate of $0.78. Comparatively, EPS for the current quarter was $0.02 a year ago. Earnings per share for the fiscal year are expected to decrease by -157.50%, and 117.46% over the next financial year. EPS should grow at an annualized rate of 7.10% over the next five years, compared to -18.90% over the past 5-year period.

If you are looking to buy this stock, then you may note that the average analyst recommendation by 28 brokerage firm advisors rate L Brands Inc. (LB) as a “Moderate Buy” at a consensus score of 2.90. Specifically, 8 Wall Street analysts polled rate the stock as a buy, while 17 of the 28 advise that investors “hold,” and 3 rated it as a “Sell.”

Looking at the support for the LB, a number of firms have released research notes about the stock. Telsey Advisory Group stated their Market Perform rating for the stock in a research note on August 21, 2020, with the firm’s price target at $23-$30. Citigroup coverage for the L Brands Inc. (LB) stock in a research note released on July 30, 2020 offered a Sell rating with a price target of $17. JP Morgan was of a view on July 29, 2020 that the stock is Overweight, while Telsey Advisory Group gave the stock Market Perform rating on July 29, 2020, issuing a price target of $15- $23. Telsey Advisory Group on their part issued Market Perform rating on May 22, 2020.

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