Jefferies has hiked its price target on Burberry (LON:BRBY), saying that it now has greater confidence in the company’s outlook, Citywire reports. The analysts, however, have also admitted that there are challenges ahead for the luxury goods retailer.
Burberry’s share price has gained ground in London this morning, having added 0.45 percent to 2,012.00p as of 09:57 BST. The stock is outperforming the broader UK market, with the benchmark FTSE 100 index having marginally slipped into negative territory and currently standing 0.07 percent lower at 7,786.45 points.
Jefferies hikes valuation on Burberry
Jefferies lifted its price target on Burberry from 1,700p to 2,020p yesterday, while maintaining its ‘hold’ recommendation on the shares. The move came after the luxury goods retailer recently posted its full-year results, reporting a rise in profits and announcing a share buyback.
“We increase our price target […] this is less so on the result of new post-full year guidance but rather reflects a greater confidence in the strategy as newsflow unravels,” the broker’s analyst Flavio Cereda commented, as quoted by Citywire, adding, however, that reversing the recent deterioration in metrics and brand profile remained a challenge, while the 15-percent “bounce since the GBL stake sale a fortnight ago appears stretched given recovery signs are not yet evident”.
‘Underperformer’ in some respects
The analyst further pointed out that Burberry remained an ‘underperformer’ with “issues relating to product and distribution coming under management scrutiny, digital effectiveness remains poor, pricing is unbecoming of luxury status in many categories and brand profile is not where it should be”.
The comments came as Royal Bank of Canada also lifted its valuation on the FTSE 100 group this week, arguing that with retail like-for-like growth remaining below that of opex inflation, cost savings were protecting short-term profitability at Burberry.