UBS expects average industry growth to slow from 10% annually in 2016 to 6% next year.
The luxury sector, notoriously volatile but always fascinating for investors, is in focus as we approach 2024.
The S&P Global Luxury Index experienced a 25% rise earlier this year, only to suffer a massive sell-off of more than 12% over the next six months amid growing concerns of a possible recession.
Despite the cautious attitude towards the luxury sector as a whole, UBS has an optimistic outlook for Hermes, Richemont, and Hugo Boss. Analysts point out that these three choices have attractive valuations, which should ensure minimal risk in the event of a recession.
“In a complex sector environment, we favor more defensive names, such as Hermes (Buy), which we believe would see the lowest risk to estimates in the event of a recession, thus supporting its premium valuation,” said UBS analysts led by Zuzanna Pusz.
At the same time, UBS highlighted its interest in value stocks such as Richemont and Hugo Boss (both rated Buy), which, thanks to very low valuations and evolving stock histories, would have a shallow barrier to deliver positive results.
leggi anche
4 stocks for a recession-proof portfolio
The Swiss bank set a price target of 85 euros ($93) per share for Hugo Boss, indicating a 38% upside from the current share price. For Richemont, UBS has a price target of 113.75 Swiss francs ($129), representing a 23% increase. Furthermore, the price target for Hermes has been revised upwards to 2,216 euros, which is 12% above the current share price.
Despite the positive outlook for these three companies, UBS has a more cautious view of the luxury sector as a whole. He predicts average industry growth will slow from 10% annually in 2016 to 6% next year, as it becomes increasingly dependent on spending by Chinese consumers.
UBS is also concerned about a further weakening of demand in the vital US market due to recession risks. It expects average price-related industry earnings to moderate from 6% annually from 2020 to 2023 to 3% in 2024 as inflation cools.
As a result, the bank’s analysts cut their 2024 earnings estimates across the industry by 5% on average. UBS is negative on Burberry and Ferragamo, for which it maintains a sell recommendation.
| Disclaimer The information and considerations contained in this article should not be used as the sole and principal basis on which to make investment decisions. The reader maintains full freedom in his own investment choices and full responsibility in making them, since he alone knows his risk appetite and his time horizon. The information contained in the article is provided for informational purposes only and its disclosure does not constitute and should not be considered an offer or solicitation for public savings. |
Original article published on Money.it Italy 2023-12-08 07:00:00. Original title: Lusso, le 2 azioni da vendere nel 2024
