RBC Capital upgrades Burberry to 'sector perform'
RBC Capital Markets upgraded Burberry to ‘sector perform’ from ‘underperform’ on Monday, lifting the price target to 1,620p from 1,450p as it pointed to limited downside risk following a 28 percentage point year-to-date relative share price underperformance.
It also pointed to a valuation de-rating of 8% versus a sector re-rating of +14%.
The bank said potential for a 2Q21 beat is a positive near-term catalyst, while FX upgrades for FY21 estimates are in contrast to European peers.
RBC said it reckons Burberry will beat its fiscal 2Q21 retail like-for-like target of -15 to -20%, reflecting a revenue recovery profile similar to peers with healthy trends in mainland China and improving trends in North America, despite a soft European market.
It also estimates £22m of FX transactional benefit for FY21, which it said is not fully reflected in consensus.
"We believe Burberry's established presence in digital coupled with strategic improvements to product and merchandising should support further improvements in brand heat and revenue recovery in the coming quarters," it said.