Hermès: Credit Suisse downgrades buy rating

(CercleFinance.com) - In a research note published yesterday, Credit Suisse downgraded its rating on the share of French luxury goods group Hermes International, saying that investors would be well advised to take a "pause".

As such, the broker has downgraded its former buy rating (outperform) to neutral, even though it has raised its target price for the share from 531 euros to 600 euros.

After the publication of Hermès' annual results, analysts have increased their EPS estmates by around 4%for 2019 and 2020. However, while Hermès remains a unique business model in its sector, it is not sheltered from a slowdown in China, the broker believes.

Finally, Credit Suisse notes, that the stock has risen by 23% since the beginning of 2019, therefore outperforming the luxury sector by 10%. In addition, its upside potential now seems to be limited, which explains the broker's downgrade. This is particularly so, as the share is trading at an exceptional 2019 P/E of 43x, presenting an 82% premium relative to its sector, while exceeding its historical average of 76%.


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