(News Bulletin 247) – The financial intermediary raised its recommendation on the saddler to “outperformance” versus “market performance” on Tuesday, judging that the group constitutes “an insurance policy” in a portfolio.

Hermès constitutes, on the stock market, the perfect example of a so-called “quality” stock, that is to say with rock-solid economic fundamentals.

Bernstein underlines this very well in his sectoral note published this Tuesday. In the world of luxury, the saddler-leatherworker “checks the right boxes, both in terms of structural advantages and brand dynamics”.

“Hermès dominates the high end of the leather goods market, with its iconic products – Birkin and Kelly – achieving the best results in terms of consumer desirability and occupying the highest price tier,” the bank also assesses. Bernstein even believes that Hermès is “the best quality value” in the world of luxury.

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An uncertain context in luxury

But all these assets necessarily have a price which is reflected in Hermès’ demanding valuation multiples. According to Bernstein data, Hermès shares currently trade at 48.8 times expected earnings and 35.16 times expected operating income, compared to respective averages of 24.06 times and 17.8 times for the entire sector.

This high price had until now pushed Bernstein to adopt a “market performance” opinion, the equivalent of “neutral” in his terminology.

But, this Tuesday, the bank decided to revise its advice, switching to “outperform” (equivalent to buying) on ​​the value, while raising its price target to 2,493 euros compared to 2,400 euros previously. This gives Hermès shares a potential of around 15% at Monday evening’s close.

Hermès shares rose slightly in reaction to this change in recommendation, gaining 0.36% to 2,208 euros around 10:17 a.m.

Taking a portfolio management approach, Bernstein believes that the level of prudence in luxury should be taken up a notch. At the end of a rather mixed first quarter for the sector as a whole, the bank lowered its market growth forecast, counting on 6% compared to 7% previously.

“The re-acceleration during the second half of 2024 will depend on the regained confidence of Chinese consumers, while Western consumers calm down after the euphoria of “YOLO (“you only live once” – “we only live once”). once”). The question of the effectiveness of the Chinese government’s efforts remains unresolved, and the same goes for political and geopolitical risks,” explains Bernstein.

A successful extension of the range

In view of these uncertainties, the bank judges that it is therefore appropriate to be extra cautious and bet on Hermès and its defensive nature. The saddler constitutes “an insurance policy in our portfolio” to protect against several risks, such as maintaining Chinese consumer confidence at a low level or geopolitical tensions which would remain high after the American presidential election. Bernstein expects growth of 15% for 2024 for Hermès, more than twice as much as for luxury as a whole.

Hermès had already demonstrated its defensive character in the first quarter. Over the first three months of the year, the company achieved like-for-like growth of 17% compared to growth limited to 3% for LVMH and a decline of 10% for Kering.

Two weeks ago, Jefferies, for its part, initiated its purchase coverage on Hermès. The bank appreciated its high margins as well as the successful extension of its product range, which ranges from sandals costing just under 600 euros to furniture costing more than 50,000 euros.