Shares of Coach (COH) were higher by 1.06% to $45.20 in premarket trading on Wednesday morning, following a rating upgrade to "buy" from "neutral" at Goldman Sachs. The rating hike is a result of Coach's plan to acquire fellow luxury goods retailer Kate Spade (KATE) .

The deal was announced on Monday for $2.4 billion in cash, or $18.50 per share.

"We upgrade COH ... on the back of increased confidence in its strategic allocation of capital," Goldman said in a note, according to CNBC. "If successful, the proposed KATE merger agreement ... could be a transformational moment for the business, with the potential to create substantial earnings accretion through cost synergies and favorable financing costs."

Goldman Sachs has a $55 price target on Coach stock, up from its previous target of $40.