Kepler upgrades Burberry, says it's 'time to look for the most punished names' in luxury

(Sharecast News) - Kepler Cheuvreux upgraded Burberry on Wednesday as it took a look at European luxury stocks. "After a challenging 2024, we believe growth bottomed out in Q3 2024 and now expect a slow recovery, mainly in the second half of the year," it said.

"Margins should rebound moderately in 2025 and fully recover by 2026 (+135 basis points to 27%), supported by a streamlined cost base and favourable FX effects (USD)."

Kepler said that against this backdrop and given the more reasonable valuation - excluding Hermes - and improving earnings, it has resumed a positive stance on the sector.

"It's time to look for the most punished names," it said.

Kepler upgraded LVMH, Kering and Burberry to 'buy' from 'hold', and Salvatore Ferragamo to 'hold' from 'reduce'. It downgraded Hermes to 'hold' from 'buy'.

Kepler said its top picks are now Prada and LVMH, replacing Hermes and Richemont.