ZGN - Ermenegildo Zegna: Unjustified Sell-Off (Rating Upgrade)

2024-04-09 23:40:03 ET

Summary

• Ermenegildo Zegna N.V. released its Q4 and provided lower estimates on the Q1 sales.
• Here at the Lab, we believe this sell-off is unjustified, given the company's long-term growth potential.
• Higher DPS, solid balance sheet, quiet luxury upside, and a discount P/E to peers make Zegna (once again) a buy.

Last week, Ermenegildo Zegna N.V. ( ZGN ) released its Q4 and FY 2023 earnings results. Here at the Lab, we perfectly timed the market with a rating downgrade , and following a 20% stock price drop (Fig 1), we believe we are back in buy territory again. In our last assessment, we explained how the company valuation was aligned with its closest peers, and following the December Capital Market Day, Wall Street sell-side analysts were incorporating higher sales guidance. While the company continues to reiterate its long-term sales and EBIT growth outlook, Zegna Q1 organic sales are expected to decline by a mid-single-digit rate (Fig 2)....

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