BofA Securities Downgrades Ermenegildo Zegna Group (ZGN) to Neutral

BofA Securities analyst Ashley Wallace downgraded Ermenegildo Zegna Group (NYSE: ZGN) from Buy to Neutral with a price target of $9.80 (from $13.00).

The analyst comments: "We move Zegna to Neutral rating (from Buy), with a revised PO of $9.80 (was $13). This includes a 20% discount to our DCF, as we don't believe luxury stocks will trade at fair value in the near term given weak revenue and earnings momentum. We also lower our terminal EBIT margin assumption from 17.0% to 15.5% to reflect higher cost of doing business and compares with 2024E margin of 10%. The P/E rel of luxury companies is closely correlated to revenue performance. We believe that muted luxury sector revenue growth will likely continue into 2H24 and 2025 (-1% in 2H and +3% in 2025), leading to margin pressure, and earnings risk. The recent deterioration of sector growth has been the Chinese consumer, which was also flagged by Zegna at its 2Q result call last week. We believe that the slowdown in sector revenues are cyclical not structural and driven primarily by synchronised consumption weakness across US, EU and China."

For an analyst ratings summary and ratings history on Ermenegildo Zegna Group click here. For more ratings news on Ermenegildo Zegna Group click here.

Shares of Ermenegildo Zegna Group closed at $8.47 yesterday.

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