L Brands Analyst Shifts From Bear To Bull, Says 'Change Is Afoot'

L Brands Inc LB has notable upside potential and there are two paths to unlocking value, according to Barclays.

The Analyst

Adrienne Yih upgraded L Brands from Underweight to Overweight with a price target lifted from $15 to $30.

The Thesis

L Brands could move higher if one of two scenarios play out in the near-term, Yih wrote in the note.

First, activist investor Barington Capital Group took a stake in L Brands in early 2019 and could push value-enhancing strategies ahead of the March 17 deadline for new board nominees.

Second, L Brands has several potential initiatives it can pursue to unlock asset value. These include real estate rationalization, inventory reduction, cost reduction or redirection of its brand positioning.

The company can also sell its Victoria's Secret brand, which has seen years of declining sales while its Bath & Body Works unit has seen growth. Since fiscal 2014, the Victoria's Secret has seen sales fall from $7.2 billion to an estimated $6.7 billion in fiscal 2019. Over the same time period, Bath & Body Works sales rose from $3.4 billion to $5.2 billion.

There is also a potential risk that L Brands doesn't announce a compelling catalyst or the company is unable to succeed in any turnaround plan.

Price Action

Shares of L Brands were trading higher by more than 4% at $20.85.

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