Coty’s stock (NYSE: COTY) jumped a massive 48% in the last 5 trading days. Despite this, the stock is still down 30% from year-beginning levels. So what should you do next? We need to be cautious when considering such big moves as a pullback can happen. We assess that despite Coty’s recent climb, it could still be a risky investment. We have maintained this stance for the last couple of months, while acknowledging that investors can benefit from near term movement. That near term movement happened last week, and exceeded our expectations. What comes next could be a relative quiet period with little to no returns, and possibly, a fall. This assessment is primarily based on the output of our AI engine which analyzes past patterns in stock movements to predict near term behavior. It suggests nearly a -6% pull back for Coty over the next 1 month, and only a small return of 1.2% over the next 3 months. Our detailed dashboard highlights the expected return for Coty given its recent move, and can help you understand near-term return probabilities for different levels of movements.
When considering a longer time frame, it is important to look at the behavior of the underlying fundamentals. Our dashboard Big Movers: Coty Moved 48% – What Next? lays this out, and the trend is not encouraging.
Coty’s revenue has decreased -17% from $7,650 Mil in 2017 to $6,288 Mil in 2019, and this decline has been consistent. For the last 12 months, this figure stood at $3,899 Mil, implying a further decrease of -38% over 2019 numbers. In addition, the company has consistently struggled with profitability. Coty’s net margins have decreased from -5.5% in 2017 to -60.2% in 2019. For the last 12 months, this figure stood at -21.5%. It has not turned a profit in the last 3 years. Considering the above, we remain cautious about Coty as a prospective long-term investment unless there is a sharp rebound in demand accompanied by improved margin control.
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