Investing.com -- Morgan Stanley (NYSE:MS) has upgraded Richemont SA (SIX:CFR) stock to Overweight and raised its price target to CHF 200 from CHF 148.
With Richemont ’s stock up 27% year-to-date, making it one of the best performers in the personal luxury goods sector, Morgan Stanley now sees further upside potential, albeit at a more moderate pace than the past 12 months.
"Overall, we feel that, while the potential upside for the shares in the next 12 months might not be as significant as over the past 12 months, our DCF-implied valuation translates into a share price of CHF 200 (current share price CHF 175) and this justifies an Overweight rating," analysts led by Edouard Aubin wrote.
Morgan Stanley has lifted its earnings estimates for Richemont for the fiscal year 2025-2027 cycle and expects multiple expansion to follow. The stock is currently trading at a 23x forward price-to-earnings (P/E), which the bank sees as attractive given Richemont’s strong balance sheet and high visibility of revenue and margin growth.
A key driver behind the upgrade is management changes. "We think the promotion of Nicolas Bos from Van Cleef & Arpels’ CEO to Group CEO on 1 June 2024 marked a turning point for the group." Bos has overseen significant success at Van Cleef & Arpels over the past 12 years, and Morgan Stanley believes he will bring a similar strategic focus to Richemont’s broader portfolio.
Another factor supporting the upgrade is the strength of Richemont’s Jewellery Maisons division. "We agree but also think the biggest drivers of Cartier and Van Cleef’s past and future (out)performance relate to the quality of management and strength of the brands."
Analysts highlight that Cartier and Van Cleef & Arpels own the main iconic lines in the jewelry segment and have maintained pricing discipline compared to luxury peers.
Morgan Stanley also expresses greater confidence in the Specialty Watchmakers division, despite prior concerns over Richemont’s exposure to the Swiss watch market. While some investors argue that certain Richemont brands lack the heritage and positioning of competitors such as Audemars Piguet, the bank sees potential for improvement under Bos’s leadership.
In addition, the ’Others’ division, which includes brands such as Chloe and Alaia, is expected to be less of a drag on group performance. Recent channel checks indicate improving desirability for these brands, and Morgan Stanley has revised its constant FX growth estimate for this segment to +7% in fiscal year 2026 from +2% previously.
At the same time, Morgan Stanley analysts acknowledge potential risks, including Richemont’s strong year-to-date performance already pricing in much of the upside, temporary boosts from election-related spending in the US and seasonal demand shifts in China, and potential tariffs on European luxury goods.