Investing.com -- Goldman Sachs initiated coverage of 10 European luxury stocks, assigning Buy ratings to just four, as it argued that muted sector growth will not last and that 2027 will mark a turning point after three years of post-COVID normalization.
Analysts led by Erwan Rambourg said the slowdown in sales has been driven less by macro headwinds than by "aggressive pricing and a slower pace of innovation, both potentially linked to a degree of strategic inertia." The team noted that traditional luxury brands raised prices by about 60% between mid-2019 and mid-2026, pushing consumers toward both higher-end and more accessible brands.
Goldman forecasts organic sales growth for its coverage rising from 6% in 2026, on depressed 2024 and 2025 comparisons, to 7% in 2027, with the sector reverting to mid-single-digit growth. Regionally, it expects U.S. outperformance to extend into 2027 and beyond, a mechanical rebound in the Middle East and stabilizing sales in China, while Europe stays muted apart from American tourist flows.
The four Buy-rated stocks are Richemont, LVMH, Moncler and Prada. The firm set a CHF225 price target on Richemont, calling it the "purest exposure to compounding jewelry growth," which it expects to keep compounding.
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The broker set a €500 target on LVMH, expecting leather goods to rebound from 2027 and arguing that, as a proxy for the sector, the stock could benefit disproportionately if investors return to luxury.
Moncler received a €62 target, with Goldman citing best-in-class top-line growth, superior margins and a tangible U.S. opportunity. Prada's target is HK$52, with the analysts saying its valuation looks "particularly undervalued" relative to its earnings growth.
Goldman initiated Kering, Burberry and Brunello Cucinelli at Neutral, and kept Zegna at Neutral. Kering's relaunch plan remains unproven, in its view, while Brunello Cucinelli's steady growth "comes at a price," the analysts said.
On the downside, the bank started Hermes and Swatch at Sell. For Hermes, analysts said the historical double-digit quarterly growth "has clearly come to a halt," even though the shares are down 36% year to date. On Swatch, they cited a demanding valuation and said the company's smaller scale "implies that cost of growth would have an impact on the rebuild of sustainably high margins."
Original Article
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