It's still too early to buy the luxury sector pullback, according to BofA analysts in a note Thursday.
Analysts explained that the best buying opportunity in luxury usually comes with fear over structural growth, but whilst luxury stocks are down 16% from the peak, "we are not yet there."
"4% revenue growth in 2024 will be entirely back half weighted, and margins will be down c.100bp in 2022-24, which will translate into only 2% sector EPS growth for 2024 (5% below consensus)," analysts wrote.
"The sector trades on 21x 2024E P/E, in line with history, and we see no catalyst for a re-rating whilst earnings momentum is soft (for at least 6m)," added analysts.
However, BofA notes that structural drivers are still intact, while cultural relevance and brand equity continue to rise, supporting future outperformance.
"Whilst we think it's still too early to be more constructive the sector overall, on a relative basis we like Buy-rated Hermes, LVMH (EPA:LVMH), Pandora (OTC:PANDY) & Boss vs U/P-rated Burberry & Kering (EPA:PRTP)," analysts continued.