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Investing.com -- Pandora (OTC:PNDRY) was upgraded to “sector perform” from “underperform” by RBC Capital Markets, which cited share price weakness and a more balanced equity setup amid lowered margin expectations and resilient top-line performance, in a note dated Thursday.
Shares have fallen 26% over the past three months, sharply underperforming the MSCI Europe index.
RBC said the de-rating makes valuation more reasonable, with the stock now trading at 13 times estimated 2026 earnings, back in line with the 10-year average.
The upgrade reflects what RBC views as more realistic profit targets after Pandora lowered its FY26 EBIT margin guidance to 25%, from a prior range of 26–27%.
While cost and currency headwinds persist, including potential impacts from U.S. tariffs and commodity volatility, the company’s pricing strategy and cost measures appear better aligned with current macro conditions.
Pandora’s first-quarter results showed continued strength. Organic revenue rose 7% with like-for-like retail sales up 6%.
Gross margin of 80.4% exceeded expectations, while EBIT of DKK 1.64 billion and EPS of DKK 14 both came in ahead of consensus.
Current trading trends in the second quarter are tracking mid-single-digit growth, consistent with earlier performance.
The company maintained its full-year organic revenue outlook of 7–8% growth, though it trimmed its FY25 EBIT margin forecast to around 24% due to FX pressure.
RBC raised FY26 earnings forecasts by 3–4%, supported by efficiency gains, while lowering FY25 EBIT by 3%.
Full-year net income for FY26 is now estimated at DKK 5.99 billion, with EPS of DKK 80.1.
Risks remain, particularly from potential tariffs in the U.S., where Pandora is modeling a range of outcomes.
Price increases planned for October 2024 and April 2025 could help offset these impacts, but RBC warned that consumer sensitivity to higher prices may still emerge.
RBC’s price target remains unchanged at DKK 1,050, based on a blended DCF and 13x FY26 earnings multiple.