Bank of America just raised its EUR/USD forecast
On Thursday, BofA Securities upgraded Ermenegildo Zegna Group (NYSE:ZGN) stock from Neutral to Buy, adjusting the price target to $8.90, which is a decrease from the previous $9.40. The upgrade comes as part of a strategic reassessment in the luxury sector, detailed in BofA's 2025 Year Ahead report, titled "Snakes & Ladders."
BofA Securities analysts cited several reasons for the positive outlook on Zegna. They believe the luxury fashion company is currently undervalued by the market, which has overlooked significant changes within the company.
This assessment aligns with InvestingPro's Fair Value analysis, which suggests the stock is currently undervalued despite a challenging six-month period that saw a 29.77% decline. Notably, Zegna has successfully reduced its reliance on the Chinese and Asian markets, which has diversified its revenue stream.
The analysts also pointed to the Zegna brand's strong performance in developed markets, despite challenging economic conditions. Additionally, they acknowledged the company's efforts to address issues with smaller brands that have been negatively impacting its performance.
Looking forward, BofA Securities expects Zegna Group to experience a sequential acceleration in organic growth. This anticipation is supported by positive trends that emerged in the fourth quarter, suggesting that the company is moving past previous struggles.
In their assessment, BofA Securities highlighted a potential upside of 17% to the stock's price, indicating confidence in Zegna's trajectory for growth as the luxury brand continues to implement strategic changes and capitalize on market opportunities. The company maintains a strong financial health score according to InvestingPro's comprehensive analysis, though it's currently trading at a high P/E ratio relative to its near-term earnings growth expectations.
In other recent news, Ermenegildo Zegna Group faced a challenging third quarter with revenues declining by 8% year-over-year to €397 million. The Zegna brand, however, reported a 3% organic growth, primarily driven by direct-to-consumer sales in the Americas and EMEA. On the other hand, the company's Thom Browne and Tom Ford (NYSE:F) Fashion lines experienced significant revenue declines.
Morgan Stanley (NYSE:MS) initiated coverage on Zegna Group, assigning an Underweight rating and setting a price target of $7.20, while UBS and Goldman Sachs adjusted their price targets to $9.00 and $14.20 respectively.
The adjustments were due to concerns raised by the analysts, including a significant reliance on Chinese nationals, the momentum of the Triple Stitch franchise, and increased costs associated with direct-to-consumer efforts and store network expansions.
In response to these developments, Zegna Group has opened new stores and converted wholesale locations to retail, which has impacted revenue timing. The company is also planning to streamline operations and unveil new collections for Thom Browne and Tom Ford by mid-2025.
These are recent developments and further details are anticipated to be shared during the fiscal year 2024 results announcement, expected to occur between January and March.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.