On Wednesday, Kering (LON:0IIH) (EPA:PRTP) SA (KER:FP) (OTC: PPRUY), the parent company of luxury brand Gucci, received a new stock rating from Berenberg. The firm initiated coverage with a Hold rating and set a price target of €230.00. The analyst cited the importance of Gucci's turnaround for the company's overall narrative, noting that while there is positive reception among top-end buyers for the new product, the aspirational segment seems to be looking elsewhere.
The analyst pointed out a challenge for Kering in the form of a disconnect between consumer perception and the brand's image. This perception issue is seen as a hurdle in Gucci's efforts to revitalize its appeal and market position. Despite this, the analyst acknowledged that Kering's valuation is compelling but indicated a cautious stance by stating the need to wait for the end of the earnings per share (EPS) downgrade cycle before considering a more positive rating.
Kering SA's stock price target of €230.00 reflects the analyst's current view of the company's value based on the available information. The Hold rating suggests that the analyst does not see significant stock movement in the near term and advises investors to maintain their current position without adding or reducing their stake in the company.
The coverage initiation by Berenberg comes at a time when luxury brands are navigating a complex global market, with shifting consumer trends and economic factors influencing purchasing behavior. Kering SA, through its brands including Gucci, has been focusing on rejuvenating its image and product offerings to capture a broader customer base.
In other recent news, Kering SA has been the focus of multiple analyst firms who have downgraded the stock and revised earnings projections. TD Cowen maintained a Hold rating on Kering shares, expressing concerns about Gucci's recovery efforts and the potential for further risk if new product launches don't resonate with consumers. Similarly, Citi downgraded Kering's stock from Buy to Neutral, adjusting the price target due to increased challenges in executing brand turnarounds and softening demand in Asia.
Goldman Sachs (NYSE:GS) also downgraded Kering's stock from Neutral to Sell, citing concerns over reduced earnings visibility and potential operational challenges for Gucci. The bank's EBIT forecasts for fiscal years 2025 and 2026 are 11% and 10% below Visible Alpha consensus, respectively.
Jefferies adjusted its price target for Kering, predicting difficulties due to a weakening market in China. The firm revised its earnings estimates for Kering, with a 4% reduction for the year 2024 and a 3% reduction for 2025.
Barclays (LON:BARC) downgraded Kering's stock from Equalweight to Underweight, based on a steeper sales decline for Gucci in China compared to its competitors. RBC Capital also downgraded Kering SA from Outperform to Sector Perform, citing concerns over a softening luxury goods market. Their earnings per share estimates for Kering in fiscal year 2025 are 7% below the consensus.
Finally, UBS downgraded Kering SA's stock from Buy to Neutral, revising its earnings per share projections downward due to the time and costs associated with Gucci's new strategy implementation and the impact of a slowdown in sector trends on Kering's brands.
InvestingPro Insights
Kering SA's recent market performance aligns with the cautious stance taken by Berenberg analysts. According to InvestingPro data, the company's stock has taken a significant hit over the last six months, with a -26.22% price total return. This decline is reflected in the stock trading near its 52-week low, currently at 54.19% of its 52-week high.
Despite these challenges, Kering maintains some strong fundamentals. An InvestingPro Tip highlights the company's impressive gross profit margins, which stand at 75.37% for the last twelve months as of Q2 2024. This robust profitability could provide a cushion as the company navigates its turnaround strategy, particularly for Gucci.
Another notable InvestingPro Tip is that Kering pays a significant dividend to shareholders, with a current dividend yield of 6.37%. This could be attractive to investors looking for income while waiting for potential stock price recovery. Additionally, the company has maintained dividend payments for 33 consecutive years, demonstrating a commitment to shareholder returns even during challenging periods.
For investors seeking a more comprehensive analysis, InvestingPro offers 6 additional tips for Kering SA, providing a deeper understanding of the company's financial health and market position.
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