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On Friday, Jefferies analyst Anne Ling downgraded Samsonite International SA (MU:1SO) (1910:HK) (OTC: OTC:SMSEY) stock rating from Buy to Hold, significantly reducing the price target from HK$28.97 to HK$14.62. The adjustment reflects concerns about potential tariffs and their impact on consumer demand in the United States, which accounts for approximately 32% of the company's sales in 2025. The downgrade comes as the stock trades near its 52-week low, having declined about 49% over the past year. According to InvestingPro data, the company maintains strong fundamentals with a healthy 60% gross profit margin.
Ling cited the company's proactive response to the initial round of tariff hikes in 2018/19, noting that Samsonite had made swift backend adjustments. Despite these efforts, the uncertainty surrounding the scale of tariffs and their effect on US consumer behavior prompted a reassessment of the company's valuation. InvestingPro analysis suggests the stock is currently undervalued, with additional metrics showing a compelling P/E ratio of 10.4x and an attractive 4.2% dividend yield.
The new price target represents a 50% decrease from the previous figure, with the revision attributed equally to lowered earnings expectations for the years 2025 to 2027 and an increased beta to 2. This latter change indicates a higher level of risk associated with the stock due to the trade issue uncertainties.
Samsonite's downgrade comes amid a challenging environment for global trade, with tariffs potentially influencing both operational costs and consumer spending patterns. The company's heavy reliance on the US market makes it particularly sensitive to changes in trade policy and consumer sentiment in the region.
The revised price target of HK$14.62 by Jefferies reflects a cautious outlook for Samsonite as it navigates the complexities of international trade and market dynamics. Investors and stakeholders of Samsonite International SA may adjust their expectations in light of this new analysis.
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