On Friday, Goldman Sachs updated its outlook on Compagnie Financiere Richemont SA (JO:CFRJ) (CFR:SW) (OTC: CFRUY), increasing the price target to CHF165 from CHF133, while maintaining a Neutral rating on the stock. The adjustment follows Richemont (SIX:CFR)'s announcement of a 10% constant foreign exchange (cFX) sales growth for the third quarter of fiscal year 2025, ending in December, which significantly surpassed market expectations.
According to Goldman Sachs, Richemont's Jewellery Maisons segment was a standout performer, achieving a 14% cFX growth, which exceeded both the market consensus of 4% and Goldman Sachs' estimate of 5%. Despite a decline in the Specialist Watchmakers division by 8% cFX, the firm noted a sequential improvement from a 16% cFX decline in the first half of the fiscal year, suggesting that this division might be stabilizing.
The firm's analyst highlighted that as the luxury sector progresses through earnings season, a critical factor will be indications that the Chinese market, a significant driver for luxury goods, is recovering. The upcoming Chinese New Year period, starting on January 29, is expected to provide further insights into the market dynamics and Richemont's potential market share expansion.
Goldman Sachs has revised its earnings forecasts and valuation for Richemont, leading to the updated price target. The Neutral rating suggests that while the analyst acknowledges the company's strong performance, they remain cautious about the stock's future outlook in relation to market expectations.
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