Burberry Group PLC (LSE:BRBY) offers a more balanced risk/reward profile now that it’s trading at a historical high relative discount to its peers, according to analysts at UBS.
The luxury designer is also due to announce the appointment of a new chief executive after Marco Gobbetti said earlier this year he would step down around December.
READ: Burberry sales bounce back strongly though a third of stores still on reduced hours
The investment bank said new leadership will be a positive catalyst for the FTSE 100 firm.
It upgraded the stock to ‘neutral’ from ‘sell’ though it cut the price target to 1,800p from 1,861p previously.
“Since early 2020 we have been negative on BRBY amid an underlying weak performance at a crucial point in its turnaround plan (sales flat in retail versus pre-COVID levels) and the risks it poses to its mid-term outlook with the company likely soon having to significantly step-up its investments to improve its top-line growth,” UBS said.
Analysts cut full-year like-for-like revenue growth forecasts to 18% on the back of recent deceleration in trends, offset by higher expectations for wholesale thanks to US strength and updated foreign exchange assumptions in light of the recent GBP depreciation.
“The combination of weak social media and Google search trends, which point to limited brand heat at a crucial point in Burberry's turnaround plan, make us believe that the company is unlikely to achieve its mid-term growth targets beyond 2021 and see the mid-term over 20% EBIT margin target as achievable. However, with shares trading at a historical high discount versus peers those risks appear priced in,” the bank noted.
Shares were flat at 1,851p on Monday before close.