Market Insider

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 to cut jobs, shift headquarters to UK

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 chart

Source: FactSet