Bath & Body Works (BBWI): Undervalued Retail Opportunity
"My pick is called Bath and Body Works. The ticker is BBWI. The stock price is $28 and analysts are targeting somewhere around $41 to $45, which represents a 50% to 60% upside."
Toby presents Bath & Body Works (ticker BBWI) as a compelling retail investment. Trading at around $28, the stock offers a robust free cash flow yield (approximately 12%), strong member loyalty (80% of sales), and aggressive share buybacks. With analyst targets in the $41-$45 range, the upside potential is assessed at 50% to 60% over a 2-to-5-year horizon.
Bath & Body Works Buyback as an Undervaluation Signal
"I like Bath and Body Works because... they have a $5 billion market cap, generate about $750 million in free cash flow, and are executing a $500 million buyback right now, which is roughly 10% of their outstanding shares. Management is clearly signaling that they view the stock as undervalued."
The recommendation for Bath & Body Works (ticker: BBWI) is based on strong free cash flow and an aggressive buyback program. The quantitative details of a $500 million buyback on a $5 billion market cap with $750 million free cash flow support the thesis that the stock is trading at an attractive valuation. This creates a buy signal with a contrarian value angle and limited downside due to management support.