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Avon shares spike as Jefferies takes 'leap of faith'

Avon Products
Scott Eells | Bloomberg | Getty Images

Shares of Avon Products advanced 4.7 percent Friday after analysts at Jefferies initiated coverage of the stock with a "buy" rating.

"AVP is early in a three-year transformation, but selling [North American business] to Cerberus alleviates cash worries, with remaining int'l business poised for greater growth. Scenario analysis points to favorable risk/reward, with base case suggesting shares could double by end of '17," they said in a note to clients.

Jefferies also placed a $7 price target. On Friday, the stock held near $4.20.

"Buying Avon early in its three-year transformation takes a leap of faith, particularly amid an opaque [short-term] financial outlook. Despite this, we like management's explicit list of priorities for '16 as it lays a road map to reach its very achievable [long-term] targets," Jefferies said.

Avon shares are up about 3.5 percent for the year, but remain more than 35 percent lower over the past 12 months.

AVP 12-month chartSource: FactSet