Kering SA (EU:KER) shares dropped more than 3% after Morgan Stanley lowered its recommendation on the stock, shifting its rating from “overweight” to “equal-weight” and trimming its 12–18 month price target to €320 from €330. The bank pointed to limited further upside following strong share price performance earlier in the year, which it believes is now largely reflected in the valuation.
The stock had reached a year-to-date peak of €320.50 on 12 January before falling around 16% by Monday. Since the start of the year, it has still outperformed peers including LVMH, Hermès and Richemont by roughly 300 to 1,700 basis points.
After surging 10.90% on 10 February—its largest single-day gain of the period—the shares gave back much of those gains during a sharp sell-off in early March, declining 5.04% and 6.35% on 2 and 3 March respectively.
Morgan Stanley’s discounted cash flow model suggests around 15% upside to the revised target price, though the bank no longer views this as sufficient to justify outperformance.
“Our DCF implies 15% upside to the shares, which no longer translates into relative outperformance,” the note stated.
Based on the bank’s updated 2028 earnings per share forecast of €15.97—down 4% from previous estimates but still 15% above the Visible Alpha consensus of €13.80—the stock is trading at about 17 times forward earnings.
The analysts expect group revenue to reach €18.3 billion by 2028, representing roughly 25% cumulative growth from €14.7 billion in 2025. Over the same period, operating margin is projected to expand from 12.5% in 2026 to 18.4% in 2028, while EPS is forecast to rise from €6.81 to €15.97.
The downward revisions were attributed to weaker-than-anticipated channel checks in the first quarter of 2026 and exposure to geopolitical tensions in the Middle East, which accounts for around 5% of group sales.
Morgan Stanley now expects Gucci, Kering’s largest brand, to post a 6.2% decline in the first quarter of 2026, compared with a previous estimate of a 5% drop. Gucci is projected to generate €5.95 billion in revenue in 2026, increasing to €7.67 billion by 2028.
In a more optimistic scenario, the bank values the shares at €480, assuming a strong revival cycle at Gucci and group operating margins reaching 25.9% by 2028. In contrast, the downside case sees the stock at €175, based on the risk that Gucci’s new direction fails to gain traction commercially. Options pricing suggests a roughly 28.9% probability that the shares exceed €320 over the next 12 months, versus a 17.1% chance of falling below €175.
Morgan Stanley highlighted two key triggers that could shift its stance more positively: continued organisational changes following the appointment of Luca de Meo as CEO in September 2025, and clearer evidence of a sustained turnaround at Gucci.
The analysts described Gucci’s situation as “a classic case where improving buzz is running ahead of the hard numbers,” adding that channel checks across European retailers show “early signs of improving brand buzz but little evidence yet of a meaningful commercial recovery.”
Leave a Reply