Kering downgraded to “hold” as HSBC cautions on lack of near-term catalysts

Investing.com -- HSBC downgraded Kering (EPA:PRTP) to “hold” from “buy” on Friday, citing the luxury group’s rapid share price surge and a lack of imminent positive catalysts, sending shares down by 3%. 

The brokerage raised its target price to €370 from €335, noting higher estimates but warning that “it is time to take a breather” after the stock’s 120% rise since April and 100% jump since June, when Luca de Meo was announced as chief executive. 

Kering closed at €344.95 on Thursday, implying about 7.3% upside to HSBC’s revised target.

The brokerage said many of Kering’s strategic and structural changes have already been implemented, leaving few fresh triggers ahead of the next major update expected in mid-February 2026. 

“Many changes already implemented; few catalysts until mid-Feb 2026,” HSBC said. The analysts pointed to the disposal of Kering’s beauty division to L’Oréal for €4 billion and the postponement of the acquisition of the remaining 70% stake in Valentino until at least 2028 as significant portfolio adjustments made under De Meo.

The analysts said the group’s accelerated transformation has been reflected in its share price performance. 

“Kering’s share price has been up 120% since this year’s lows reached on 9 April at €156.92 (vs CAC 40 +20%) or up 100% (vs CAC 40 +7%) since the announcement of Kering’s new CEO in mid-June,” the brokerage noted. 

They added that with such a sharp rise, “we believe it is time to take a breather, as we see few positive catalysts playing out between now and the first speech of CEO Luca de Meo likely happening with FY2025 earnings publication in mid-February.”

HSBC maintained that operational progress was evident across Kering’s “processes, people, and portfolio,” but argued that the pace of restructuring has left limited near-term upside. The disposal of the beauty business is expected to “help the group to deleverage its balance sheet but also provides more financial flexibility to Kering.”

Kering’s 2025 outlook remains subdued, with group revenue projected to fall 13.6% to €14.86 billion, led by a 19.9% drop at Gucci, 6.8% at Yves Saint Laurent, and 6.9% at other brands. 

EBIT is expected to decline 32.7% to €1.72 billion, pushing the operating margin down to 11.6%. Earnings per share are forecast at €6.24, down 32.5% from 2024. 

HSBC expects a rebound in 2026 with group sales up 6.5% and an EBIT margin of 14.6%, rising to 16.5% in 2027.

The analysts said Kering now trades at 26.3× 2027 earnings, compared with LVMH’s 23.4×, placing it at a premium to its larger rival.

Despite this, they argued that “in the absence of positive catalysts in the next three months, the share price will not move much between now and mid-February.”

The brokerage added that the next major catalyst for investors would likely be a strategic update next spring.

HSBC’s DCF-based valuation assumed a weighted average cost of capital of 7.7%, up from 7.1%, reflecting a 4.25% risk-free rate and a company-specific beta of 1.15. Its target price implies around 7% upside.