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On Wednesday, Berenberg initiated coverage on Davide Campari-Milano Spa (CPR:IM) with a Hold rating and a price target of €6.30. The move reflects the analyst’s cautious stance on the spirits sector’s vulnerability to international trade tariffs. The analysis by Berenberg suggests that approximately 25% of Campari (LON:0ROY)’s net sales are at potential risk due to tariffs, particularly those affecting European Union and Mexican products entering the U.S. market.
The Hold rating is based on the potential impact of trade barriers on Campari’s business, which relies heavily on the ’appellation of origin’ for its products. Berenberg’s price target considers possible scenarios where tariffs of 25% to 50% could be implemented across major economic regions, including the U.S., the EU, and China.
Berenberg’s assessment acknowledges that while the risk posed by tariffs to Campari is significant, it is not insurmountable. The firm’s analysis takes into account the various outcomes of the ongoing trade tensions. If trade wars are amicably resolved, there could be a considerable upside to Campari’s valuation. Conversely, if tariffs are implemented, the downside could be more substantial for Campari compared to larger industry players such as Diageo (LON:DGE) or Pernod.
The coverage initiation on Davide Campari-Milano Spa by Berenberg comes at a time when the spirits sector is navigating through a period of economic uncertainty, with trade policies playing a critical role in shaping the market dynamics. The company’s exposure to potential trade barriers could influence its performance in key markets, underscoring the importance of strategic planning in the face of geopolitical shifts.
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