On Thursday, Citi analyst Thomas Chauvet upgraded Burberry Group (OTC:BURBY) PLC (BRBY:LN) (OTC:BBRYF) stock from Neutral to Buy, adjusting the price target to GBP9.25, a decrease from the previous GBP9.80. The revision reflects a positive outlook on the company’s future performance, with the new price target based on a Discounted Cash Flow (DCF) analysis.
Chauvet’s endorsement of Burberry (LON:BRBY) is founded on several key factors. He believes the company’s "Burberry Forward" strategy will successfully enhance the brand’s visibility and desirability. This optimism is further supported by positive indicators such as strong brand perception and an increase in consumer intention to purchase Burberry’s outerwear and scarves, as revealed by a proprietary survey.
The upgrade also takes into account improved web traffic and social media engagement metrics, which signal growing consumer interest. Additionally, Chauvet sees the United States as a promising growth market for Burberry, despite some manageable tariff risks.
Investors are presented with an attractive risk/reward scenario given the recent de-rating of Burberry’s shares. Chauvet suggests that the company’s significant transformation potential over the next three years justifies the current stock valuation. He forecasts a Compound Annual Growth Rate (CAGR) of 7% in sales, 56% in adjusted EBIT, and 77% in Earnings Per Share (EPS) from FY26E to FY28E, following a transitional FY25E.
Chauvet’s analysis indicates that if Burberry can maintain stability, medium-term forecasts might be conservative. He compares the Citi and consensus FY28E EBIT forecasts of GBP364 million and GBP287 million, respectively, to the 6-year average pre-pandemic EBIT of GBP450 million, highlighting the potential for significant growth.
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