Live Markets: RBC gets constructive on luxury

Watches of Switzerland

12/12/2024 10:34

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    RBC GETS CONSTRUCTIVE ON LUXURY 
    Luxury stocks have been under pressure in recent months, but RBC analysts are getting more
constructive on the space, with recent macro datapoints from the U.S. and China reinforcing
their expectations of revenue stabilisation. 
     "Investor positioning appears favourable (relatively underweight) whilst sentiment is
turning more positive based on our discussions which are largely focused on China, US consumer
health and the potential timing of inflection in trends," they wrote in a Thursday note. 
    In a note earlier this month, RBC also flagged U.S. improvement post-election and rallying
asset prices, as well as what they dub a "a no-worse China setup", as factors behind their
expectations of a stabilisation or normalisation of revenue growth. 
    And for luxury overall, they forecast 5% sector organic revenue growth (unweighted) by 2025.
    Zooming into Europe, RBC analysts say the region's luxury sector trades at a 92% P/E premium
to MSCI Europe, above its historical average of 74%, though that valuation premium has
normalised closer to historical average levels in recent months. 
    The RBC analysts prefer LVMH  LVMH.PA  as well as Burberry  BRBY.L  and Watches of
Switzerland  WOSG.L .
    In sporting goods, they flag investors asking more about Nike's  NKE.N  turnaround
potential, but that visibility and timing remain low and its valuation is not compelling enough.
 
    Adidas  ADSGn.DE  meanwhile is their top pick in sporting goods in part given its strong
double-digit growth profile. 

    (Lucy Raitano)
    *****
    
     
    EARLIER ON LIVE MARKETS:
    ZURICH POPS, LUXURY IN DEMAND CLICK HERE
    EUROPE BEFORE THE BELL: ALL QUIET AHEAD OF THE ECB CLICK HERE
    ECB, SWISS SET TO CUT, BUT BY HOW MUCH? CLICK HERE