Bath & Body Works' (BBWI) Q3 results "unexpectedly delivered topline upside on core product strength," Morgan Stanley said in a report emailed Tuesday.

The investment bank said it now has an "incremental conviction" in the company's "ability to deliver at least +LSD% steady-state growth over time -- a positive development following our more uncertain view exiting 2Q."

Even after Bath & Body Works' share price gains on Monday its "valuation remains inexpensive" which indicates "ongoing room for re-rating closer to peers with similar financial profiles," the report said.

The re-rating opportunity combined with "clear momentum/positive rate of change in topline growth trends" plus the company's "relative tariff insulation vs. peers" and "attractive relative position" warrants the continuation of its overweight rating, Morgan Stanley said.

The investment firm raised Bath & Body Works' price target to $49 from $48.

Price: 34.72, Change: -1.06, Percent Change: -2.96