PPRUF - Kering: After A Huge Drop A Luxury Discount

2024-05-15 08:40:17 ET

Summary

• Kering shares experienced a two-years-long drawdown, losing more than half from their peak price.
• The company experienced an important sales decline, especially from its flagship brand, Gucci.
• Important investments and a radical renovation of strategies and brand organization put even more weight on earnings.
• I find the company currently deeply undervalued.
• I begin the coverage with a BUY recommendation, with the company ready to turnaround as soon as the situation stabilizes. A great dividend yield could give some returns in the meantime.

Investment thesis

Kering (PPRUF) ( PPRUY) is a French company, owner of important luxury brands in the fashion sector. My investment thesis for this analysis might seem particularly "poor": usually for my investments (and therefore for my analyses) I choose companies that have interesting characteristics from a technological point of view, leadership in their market or in some form "disruptive" compared to direct competitors.

"It's far better to buy a wonderful company at a fair price than a fair company at a wonderful price." - Warren Buffet

Although I usually agree with the sentence above, in this specific case the price of this "fair company" is definitely too "wonderful" to not be taken into consideration, and will represent the focal point of my BUY recommendation....

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