Shares in Burberry Group PLC (LON:BRBY) were in fashion with investors on Monday after UBS reiterated its ‘buy’ recommendation and upped its price target for the luxury fashion brand.
In a note to clients this morning, the Swiss bank said it felt the stock was undervalued by the markets, adding that the trench coat maker trades at a discount to its peers.
“Burberry is our preferred turnaround name in luxury, as we see a bigger opportunity to improve sales densities and drive operating leverage than the market currently looks to be pricing in,” said analyst Helen Brand.
A number of internal changes have also stabilised the business according to the analyst, who praised improvements in cost-cutting, productivity and talent acquisition.
In particular, the appointments of Marco Gobbetti as the new chief executive (starting in July) and Julie Brown as the new chief financial officer have gone down well with Brand.
“Overall we were impressed by the scale of change already under way: new talent has not only been brought in at CEO/ CFO level but also in the form of new leather goods designer, Sabrina Bonesi from Dior and Claudia Plant (ex Net-A-Porter) who will focus on brand management,” the analyst explained.
“Investors have started to gain confidence that this new team can execute on the business's ambitions, and this is even before the new CEO & CFO have addressed the market.”
UBS is forecasting net earnings of £321mln on revenues of £2.8bn for the year ended March 2017. Those figures are predicted to rise to £361mln and £3bn respectively in this coming year.
Brand repeated her ‘buy’ recommendation for the stock and upped her target price to £19.90 from £18.25.
Shares gained the best part of 2% to trade at £17.53 on Monday morning.