Deutsche Bank lowers target prices for the European luxury goods sector due to Middle East conflict

Investing.com – Deutsche Bank on Wednesday cut its price targets for the European luxury goods companies it covers, a sector that is down 15%-25% year to date, as the conflict in the Middle East has intensified, shattering already weak first-quarter sales outlooks.

The biggest cut was for LVMH, with its target price lowered from €705 to €620, though it still retains a “Buy” rating. Hermès’ target price was lowered from €2,360 to €2,320, and it also keeps a “Buy” rating. Burberry’s (Burberry) target price was cut from 1,550 pence to 1,480 pence, and it too keeps a “Buy” rating.

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Moncler’s target price was cut from €57 to €55, while Kering’s was lowered from €295 to €290; both keep “Hold” ratings.

Deutsche Bank analyst Adam Cochrane said: “After the results of discussions following the fiscal year report release and the Lunar New Year period proved mixed, hopes for the luxury sector to deliver strong constant-currency sales improvements on a quarter-over-quarter basis had already weakened, and the conflict in the Middle East has completely shattered that expectation.”

Deutsche Bank lowered its estimate for first-quarter sales growth for the sector from 6% to about 3%, though Cochrane said that “most of it has already been reflected in expectations and valuation.”

Cochrane noted that the sector’s current 2026 calendar-year price-to-earnings multiple is about 21 times (excluding Hermès), implying about 10% earnings per share growth, “toward the cheaper end of its trading range.”

Cochrane believes the selloff is “mainly driven by cyclical valuation resets.” He said the growth rationale is expected to return, driven by consumers in the U.S. and China, but the timing remains uncertain.

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