Citigroup (C) upgraded Coach (COH) to “buy” from “neutral” on Wednesday, saying the luxury brand still remains relevant and expressing the likelihood the designer’s transition to a multi-category lifestyle brand will pay off. 

Shares of the New York-based handbag retailer ticked up about 2.5% premarket to $50.

“We’re upbeat on upside because we believe the Coach brand remains relevant, COH’s plan to transition to a multi-category lifestyle brand will ultimately work, & free cash flow, absolute ROIC, net cash, return of funds, & COH’s mgmt team remains top notch,” Citi analyst Oliver Chen wrote in a note.

Coach, he added, has transitioned from a growth stock to value and the upgrade reflects good upside potential and the fact that the stock price already absorbed potential risks.

However, Citi narrowed its outlook on Coach’s same-store sales, a key growth metric that measures sales at stores open longer than a year. It now expects same-store sales to fall 2%, with lower sales possible given the “intensification of competition” and high Coach Legacy prices.

Citi maintained its price target of $56, but lowered its fiscal 2013 EPS view to $3.65, which is below the consensus view of $3.70 a share.

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