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Investing.com -- Deutsche Bank (ETR:DBKGn) has raised its rating on German skincare and cosmetics group Beiersdorf (ETR:BEIG) to “hold” from “sell,” citing the stock’s sharp underperformance and historically low valuation relative to the broader market and sector. The price target remains unchanged at €98. Beiersdorf shares closed at €97.60.
The bank’s analyst Tom Sykes noted that Beiersdorf shares have declined 21% year to date and are down 28% from their highs in the first quarter.
The stock is now trading at its lowest level in a decade relative to the MSCI Europe index.
It has also reached decade-low valuation levels when compared to the sector, prompting the upgrade despite ongoing concerns about the company’s medium-term profit outlook.
Sykes acknowledged the persistent risks to Beiersdorf’s ability to compound profits over time but emphasized that the stock’s valuation now limits downside risk.
He also flagged that management is under increased pressure to deliver results, which warrants closer monitoring of the relationship between sell-in and sell-out trends and the sustainability of growth.
The report flagged a recent rise in brand search activity, particularly for Beiersdorf’s premium products, as a potentially positive signal.
However, Sykes reiterated his view that NIVEA, the company’s flagship brand, is approaching a growth ceiling. Despite this, he believes the likelihood of a further significant decline in value is limited.
The rating revision is rooted in relative market positioning rather than any change in the company’s fundamental outlook.
“The relative valuation is now below the lows seen versus the market over the last decade and importantly has de-rated to decade-low relative valuation levels versus the sector,” Sykes said.