The descent into hell continues for Europe's luxury goods sector, following Bank of America's decision to modify several of its recommendations this morning. In particular, the American research firm made the following adjustments:

  • Compagnie Financière Richemont: BofA upgrades its Buy rating to Neutral with a price target reduced from CHF 200 to CHF 140.
  • Hugo Boss: BofA upgrades from underperform to neutral with a price target of EUR 75.
  • Kering: BofA upgrades from Neutral to Underperform with a target price of EUR 430.
  • Pandora: BofA upgrades from neutral to buy with a target price of 900 DKK.
  • Prada: BofA upgrades from Buy to Neutral with a price target reduced from CHF 200 to CHF 140.
  • Swatch Group: BofA remains Buy with a price target reduced from CHF 400 to CHF 300.
  • Tod's: BofA moves from neutral to underperform with a price target of EUR 35.

Investors are wary of the sector's sales growth momentum, noting the absence of a revival in the Chinese market, the most important driver of business growth, which is synonymous with maintaining high margins and expanding profits. Without this engine, the sector's high valuation levels are hard to justify.


July 3 to Sept 25

Investors more cautious

Last Thursday, it was the evergreen Hermès that finally faltered, weighed down by the downgrading of Oddo BHF's Buy recommendation to Neutral. At UBS, which had adopted a more cautious tone on luxury goods three weeks ago, analysts went out to meet investors to take the pulse of sentiment. "While there is a lot of appetite in the market to get into some of the highest-quality luxury names given the recent fall in share prices, we don't think this will happen in the short term as we head into the third-quarter earnings season", said UBS.Zuzanna Pusz's team stresses that the figures could disappoint, not only because of China, but also because other markets seem to be marking time. UBS notes interest in LVMH (which is under heavy attack despite being top of the class), Hermès (defensive virtues) and Ferrari (ultra-luxury confers a certain protection).