Prada a rare diamond in global luxury market, says JPMorgan
Published: 09:42 08 Oct 2024 EDT
JPMorgan has identified Prada as one of the few luxury stocks with significant upside potential heading into the third-quarter earnings season.
The bank expects muted trends in the luxury sector, with third-quarter growth likely in line with the second.
Plummeting luxury demand in the key China market coming out of Covid has caused a major upset in the global luxury sector.
Recent economic stimulus announcements from the Chinese government injected some confidence in the global markets, although that is at risk of fizzling out as concrete information on these measures has yet to materialise.
“We think the main focus of this reporting will be comments from luxury executives regarding China stimulus measures and whether there has been any early evidence of a positive impact on luxury spend specifically,” said JPM analysts.
Most luxury stocks remain out of favour with JPM, but “the only name where we see material upside to consensus into Q3 and next year is Prada, which we have on Positive Catalyst Watch, thanks to continued and accelerating superior momentum at Miu Miu and resiliency at Prada brand”.
Earlier this year, Prada posted a 44% increase in yearly profits driven in part by the “exceptional momentum” of its Miu Miu brand.
Analysts at RBC Capital Markets have a more optimistic outlook on the sector, with global luxury benchmark LVMH netting an outperform rating due to its “relatively more defensive margin profile owing to scale, diversified business model and P&L flexibility”.
This is despite concerns from others that organic sales growth at France’s most valuable company is deteriorating.
