What Happened?
Shares of beauty products company Coty (NYSE: COTY) fell 3.7% in the morning session after a securities law firm announced an investigation into the company for potential violations of federal securities laws.
The investigation by Bleichmar Fonti & Auld LLP concerned Coty's disappointing fourth-quarter and full-year 2025 financial results. The poor performance was previously attributed to delays in identifying weaknesses in its U.S. operations, a buildup of inventory at retailers, and a slowdown in cosmetics sales. The probe also focused on a period when Coty reportedly praised demand for its Prestige fragrance products while retailers were allegedly overstocked due to declining demand. News of the company's financial results had previously caused the stock to fall significantly.
The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks. Is now the time to buy Coty? Access our full analysis report here.
What Is The Market Telling Us
Coty’s shares are quite volatile and have had 19 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 20 days ago when the stock gained 1% on the news that it launched a review of its consumer beauty business, which could lead to a sale or spin-off of brands like CoverGirl. The review focused on its $1.2 billion mass-market color cosmetics segment, which included brands such as CoverGirl, Rimmel, Sally Hansen, and Max Factor, along with its business in Brazil. Coty stated it was exploring a full range of options, including partnerships, divestitures, or spin-offs. This action was part of a larger plan to shift focus toward its more profitable, higher-margin fragrance business. To support this shift, the company also announced it would more closely integrate its Prestige Beauty and Mass Fragrance operations, which together accounted for 69% of its sales.
Coty is down 39.1% since the beginning of the year, and at $4.18 per share, it is trading 46.1% below its 52-week high of $7.75 from December 2024. Investors who bought $1,000 worth of Coty’s shares 5 years ago would now be looking at an investment worth $1,289.
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