In a research note this week, HSBC revealed four luxury fashion stocks it sees as a buy.
In the note, the firm's analysts state that while catalysts for luxury fashion stocks could be limited in the short term, they see demand rebounding in the fourth quarter despite the macro.
"Demand should break on through to the other side," said HSBC, naming Moncler (BIT:MONC) and Prada (OTC:PRDSY) as the strongest stories and picking out Richemont (OTC:CFRUY) and LVMH (OTC:LVMUY) as its other buys.
LVMHF: HSBC believes that the "bold new CEO, Pietro Beccari's first meaningful appointment," proves the Paris, France-based group CEO's point that the "brand's mission is not to sell handbags but culture, opening up a world of possibilities." Over the long term, LVMH could reduce its valuation gap to be closer to the likes of L'Oréal (EPA:OREP), said the HSBC analysts. In addition, they state that in the short term shares have de-rated following the slight H1 miss, but "with c15% sales growth and EPS up 13% in 2023e, it doesn't need to rerate for the share price to increase."
Richemont: The stock has been under pressure, which HSBC believes is due to the group's exposure to Chinese clientele and the negative trends in the US. However, the HSBC analysts note that while growth could be more expensive to come by and FX weighs, they expect Cartier to continue to gain share over the next 12 months. "We believe that following a rough summer, the group's valuation is not an appropriate reflection of the quality of growth or of the business overall," the firm stated.
Moncler: HSBC expects the Moncler brand to "significantly outperform peers in terms of sales growth this year," despite the belief there will be some moderation in the short term. The firm also sees Stone Island experiencing more moderate growth as it prepares for the next phase of its expansion.
Prada: This Hong Kong-listed fashion company is well-positioned to continue to take market share, contends HSBC. "The discrepancy between brand desirability on one side and scale on the other makes us positive about Prada's prospects of outperforming the sector on both sales and margins in the next few years," they wrote. HSBC claims a dual listing and a capital markets day are probably expected by investors, with the company stating it will possibly occur.
Overall, the firm stated that Moncler and Prada are the strongest stories, while Richemont shares look overly punished, and LVMH is set to benefit from eventual U.S. rebound.