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On Monday, UBS analyst Perry Yeung downgraded shares of luggage manufacturer Samsonite International SA (MU:1SO) (1910:HK) (OTC: OTC:SMSEY) from "Buy" to "Neutral," also reducing the price target to HK$15.00 from the previous HK$28.70. The adjustment follows the announcement of steeper and more extensive US tariff increases than initially anticipated. According to InvestingPro data, Samsonite maintains impressive gross profit margins of nearly 60% and generated $700 million in EBITDA over the last twelve months.
Samsonite’s financial performance in North America, a region that represents 35% of the company’s total revenue and 38% of its adjusted EBITDA in 2024, is expected to face significant challenges due to the new tariffs. These challenges include impacts on both demand and profit margins in the critical North American market. Despite these headwinds, InvestingPro analysis suggests the stock is currently undervalued, with liquid assets exceeding short-term obligations and a healthy current ratio of 1.6x.
Despite the downgrade, UBS still acknowledges Samsonite’s potential for long-term growth, driven by its strategy of expanding its direct-to-customer network and elevating its brand. However, the firm anticipates that Samsonite will encounter short-term earnings headwinds.
Market volatility could potentially delay Samsonite’s plans for a secondary listing in the United States. Nevertheless, UBS suggests that another round of share buyback programs might be considered, given Samsonite’s strong cash generation in the face of a tough revenue landscape.
Year-to-date, Samsonite’s stock has seen a significant correction, dropping more than 30%. UBS notes that the stock is currently trading at a 2025 estimated PE (UBSe) of 11.9x. This valuation places it in the bottom 20th percentile of its historical range, yet it aligns with the average since 2022. According to UBS, this suggests that the current stock valuation is fair and has limited potential for further devaluation, unless a global recession, which is not the base case for UBS, leads to additional declines in earnings. InvestingPro data reveals the company maintains a "GREAT" financial health score and offers a notable 4.09% dividend yield. InvestingPro subscribers have access to 8 additional key insights about Samsonite’s financial position and growth prospects.
In other recent news, Samsonite International SA has been downgraded by Jefferies from a Buy to a Hold rating. This decision was made by analyst Anne Ling, who also significantly reduced the price target from HK$28.97 to HK$14.62. The revision reflects concerns over potential tariffs and their impact on consumer demand in the United States, which is a significant market for Samsonite, accounting for about 32% of its sales in 2025. Despite the company’s previous proactive measures to counter tariff impacts, the uncertainty surrounding future trade policies prompted a reassessment of its valuation. The new price target represents a 50% decrease, influenced by lowered earnings expectations for the years 2025 to 2027 and an increased risk factor, or beta, to 2. This change indicates a perceived higher risk associated with the stock due to trade uncertainties. The downgrade comes in a challenging global trade environment, with potential tariffs affecting operational costs and consumer spending patterns. Samsonite’s reliance on the US market makes it particularly sensitive to changes in trade policy and consumer sentiment in the region.
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