Four European luxury stocks, including Kering and Burberry, are undervalued according to Morningstar.

From Morningstar: 2024-06-26 04:40:00

Luxury sector is currently fairly valued with subdued near-term demand, but historically bounces back quickly from cyclical downturns. A few stocks within this sector are undervalued. Past 30 years show subdued demand lasts no longer than two years.

Among attractive luxury stocks are Kering, Burberry Group, Swatch Group, and Hugo Boss. Key Morningstar metrics for Kering include fair value estimate of €464, 5-star rating, medium uncertainty rating, and narrow economic moat.

Burberry Group, despite recent sluggish growth, benefits from high brand recognition, pricing power, and control over distribution, supporting its narrow moat. Trading at 17 times forward earnings close to trough levels, it can improve performance by strengthening less-expensive assortments.

Swatch Group has a narrow moat through brand intangible assets and manufacturing scale, offering an appealing valuation. Expected to benefit from Chinese consumption recovery, bottoming out of lower-priced watches, and cost-cutting measures.

Hugo Boss’s narrow moat comes from a strong brand in premium menswear, with sales growth boosted by marketing and presence in casual wear. Despite a competitive luxury apparel segment, shares are attractive, trading at only 11 times forward earnings.



Read more at Morningstar: Four Undervalued European Luxury Stocks