Kering SA Stock Performance

Investing.com – The stock of the French luxury group Kering SA (EPA:PRTP) dropped last week, continuing a downward trend from recent months. It closed at €236.25 on Friday, marking the lowest level since April 2017, as many analysts downgrade their recommendations on the stock.

RBC Capital Markets Downgrade

Today, RBC Capital Markets has downgraded Kering from “outperform” to “sector perform,” with the target price reduced from €310 to €290. This still indicates an upside potential of 22.7% compared to Friday’s closing price.

Reasons for Pessimistic Outlook

To justify this downgrade, RBC analysts noted signs of a slowdown in the luxury market, which could particularly impact Gucci. As Gucci transitions to a new design aesthetic, it is currently caught between its old and new product lines, complicating its market performance.

Forecasts and Earnings

Analysts predict that the timeline for a sales rebound is extended, with a return to positive growth expected only in the second half of 2025. Thus, RBC has lowered its earnings forecasts for 2025, estimating EPS to be 7% lower than consensus forecasts.

Revenue Trends

RBC’s report indicates that Gucci’s revenue trends will remain negative until the third quarter of 2025, driven by declining demand for luxury goods and the lagging integration of new products. EBIT margins are expected to decrease by 100 basis points in the first half of 2025, with slight improvements anticipated by year-end.

2024 Revenue Estimates

Analysts estimate Kering’s revenues for the fiscal year 2024 will decline by 9.7%, with operating margins facing significant pressure. Still, a modest organic growth of 3.3% is anticipated for 2025, which falls short of market expectations. Consequently, RBC’s revenue estimates for Gucci are 6% lower than the consensus for 2025.