Goldman Sachs downgrades Zegna after luxury stock outpaces peers

Investing.com -- Goldman Sachs cut its rating on Zegna to "neutral" from "buy" rating, saying the Italian luxury group’s shares had risen far enough to reflect the strength of its turnaround, even as the broker raised its price target to $14 from $13.30.

Zegna shares have gained 39% so far in 2026 and climbed 60.3% over the past 12 months, outperforming traditional luxury peers and the STOXX600 by 57 percentage points and 44 percentage points, respectively, Goldman Sachs said.

"Thesis played out - Move Zegna to Neutral," the analysts said, adding that "with the core elements of our thesis increasingly reflected in the valuation, we see a more balanced risk-reward at current levels."

The rally was driven by Zegna brand’s growth supported by its exposure to high-end consumers, reduced reliance on China with the United States taking share, and a shift toward direct-to-consumer sales, which now make up 82% of group revenue, the analysts said. Direct-to-consumer sales accounted for 73% of revenue in 2023.

Goldman Sachs said its discounted cash flow valuation, based on a 9.5% weighted average cost of capital and 3.0% terminal growth rate, points to 3% downside from current levels.

Using a sum-of-the-parts analysis that gives Thom Browne and Tom Ford Fashion the benefit of an immediate profitability ramp-up, the bank estimated only 16% upside in its base case, calculating a group enterprise value of €3.89 billion against a market-implied €3.36 billion.

The broker’s 2026 revenue forecast for the group rose less than 1% to €2.00 billion, with adjusted EBIT projected at €187 million, broadly in line with the €185 million-€190 million range management said it was comfortable with against Visible Alpha consensus.

Goldman Sachs estimated 2027 adjusted EBIT at €239 million, below the company’s guidance of €250 million-€300 million.

Zegna’s U.S. revenue share rose to about 30% in 2025 from 20% in 2022, while China’s contribution fell to about 23% from 33% over the same period.

The group’s share of retail revenue rose to 84% from 33% between 2022 and the 2026 estimate, the bank said, while China’s share of group revenue fell to 23% from 91%.

Goldman Sachs forecast 2026 earnings per share of €0.36, down from €0.38 in 2025, before rising to €0.51 in 2027 and €0.61 in 2028.

The stock traded at 34.4 times projected 2026 earnings, compared with a sector average of 26 times, excluding Hermes and Brunello Cucinelli, the bank said.

Key risks include the pace of execution at Thom Browne and Tom Ford Fashion, demand from high-end consumers, and the integration of the Tom Ford Fashion license.

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