Key Points

First-quarter 2026 sales at Victoria's Secret rose 15% year over year.
The stock rose more than 40% after it reported earnings.
Wall Street analysts from Jefferies and UBS think the rally prices in the good news.

Victoria's Secret (NYSE:VSCO) is a large, well-known retailer that sells women's clothing and lingerie. It has been working on a business turnaround for several years. And it seems like investors think that the turnaround has happened after the company reported first-quarter 2026 earnings. But Wall Street analysts from Jefferies and UBS think the stock has moved too far, too fast. They might be right.

Victoria's Secret had a good quarter

To be fair, Victoria's Secret had a very strong first quarter in 2026, despite consumers becoming increasingly budget-conscious. The retailer's sales rose 15%, exceeding management's guidance. Same-store sales growth was also impressive, at 13%. Earnings per share was $0.56, up from a loss of $0.02 per share in the first quarter of 2025.

The company also increased its full-year guidance. That is not something that companies normally do after a single quarter unless they are highly confident about the future. So it is not surprising that investors would react positively. However, the magnitude of the positive reaction was a bit shocking, with the stock gapping higher by over 40%.

Investors may be too excited about Victoria's Secret

While Victoria's Secret did have a very strong first quarter, the shockingly large stock advance on the news has analysts at Jefferies and UBS worried. Essentially, the big story is that these analysts fear investors have already priced in all the good news. Thus, there is little upside opportunity ahead. That is not an unreasonable assessment of the situation.

With such a large price move, it is almost as if Wall Street is saying Victoria's Secret became a new company overnight. The rest of the year may be stronger than the company expected just three months ago when it first provided 2026 guidance, but some perspective is needed.

For example, 2026 sales are now projected to fall between $7.03 billion and $7.13 billion, up from a range of $6.85 billion to $6.95 billion. That is less than a 3% change at both the low and high ends. Adjusted operating income is now expected to fall between $550 million and $580 million, up from a range of $430 million to $460 million. That is a more impressive change, with net income jumping nearly 28% at the low end of the range and 26% at the high end.

But the 40% one-day stock advance still dwarfs the changes the company made to its guidance. It looks like investors are pricing in more than just the first quarter's good news with this apparel stock.

It may pay to be cautious with Victoria's Secret

If you owned Victoria's Secret before the huge stock advance, you have scored a big win. That is great, but you should probably reconsider your investment thesis now. It might be time to take some profits and move on, as Jefferies and UBS seem to be suggesting.

If you did not own the stock, the value equation changed dramatically, virtually overnight. It may not make sense to follow the crowd into the stock at this point, particularly given Wall Street's broader concerns about inflation, energy prices, and the risk of a recession.

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Reuben Gregg Brewer has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Victoria's Secret and Co. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.