On Tuesday, Bernstein analysts maintained a positive outlook on Hermes International (OTC:HESAF) (RMS:FP) (OTC: HESAY (OTC:HESAY)) shares, reiterating an Outperform rating with a price target of EUR2,450.00. The stock currently trades at $279.88, near its 52-week high of $285, reflecting strong investor confidence. According to InvestingPro analysis, the stock appears overvalued at current levels, trading at a P/E ratio of 63.87. The firm's analysis indicates that Hermes, known for its defensiveness in the luxury sector, is poised to continue its strong performance, leveraging its strategy of limited production to maintain exclusivity and desirability, particularly for its iconic handbags.
The company's practice of producing fewer items than the market demands has resulted in waiting lists that provide a buffer against fluctuations in demand, a strategy that proved effective during the demand lulls of 2024. Analysts expect Hermes to report robust fourth-quarter and full-year 2024 results on February 14, reflecting the company's solid position in the market. InvestingPro data shows impressive gross profit margins of 71.45% and an excellent financial health score, with 20+ additional insights available to subscribers.
Bernstein's research suggests that Hermes's revenue growth will be aided by significant pricing advantages. The company was conservative with price hikes during the post-Covid luxury demand surge, leaving it with considerable room to adjust prices favorably. Hermes is strategically raising prices in Europe and reestablishing price gaps in Japan and China, where currency weakness had previously diminished traditional industry price premiums.
The anticipated global like-for-like (LFL) pricing tailwinds for Hermes in the fiscal year 2025 are estimated at around 7%, which is expected to outpace most of its competitors. The company has demonstrated strong momentum with revenue growth of 10.98% and a remarkable year-to-date return of 17.09%. The Bernstein analysts reflected on their past decisions, acknowledging that they had previously downgraded Hermes too soon after the Covid-19 pandemic, a move they now view as premature given the stock's resilience and performance. Discover comprehensive valuation metrics and growth potential analysis in the detailed Pro Research Report, available exclusively on InvestingPro.
In other recent news, luxury goods company Hermès International has been upgraded from a Hold to a Buy stance by Stifel analysts, who also increased the price target from EUR 2,150.00 to EUR 2,560.00. This adjustment reflects a positive outlook on Hermès's financial performance, with Stifel raising its forecasts for the fiscal years 2025-26 EBIT (earnings before interest and taxes) by 3%. These projections now stand 3-4% above the consensus estimates.
Stifel's upgrade is based on several factors expected to contribute to Hermès's continued success. The analysts anticipate the company will maintain a significant growth differential compared to its sector peers, particularly in the first half of 2025. This optimism is attributed to Hermès's untapped pricing power, high demand for its leather goods, and a solid base of affluent and loyal customers.
Stifel believes these factors position Hermès favorably to safeguard its profit margins in 2025, despite potential industry-wide headwinds from adverse foreign exchange hedging dynamics. The firm also underscored Hermès's unique strengths, including its ability to command higher prices and its visibility in the leather goods market. These competitive advantages are expected to drive the company's robust performance and outperformance within its coverage universe.
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