In a report released today, Oliver Chen from TD Cowen maintained a Hold rating on Ermenegildo Zegna, with a price target of $8.80.
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Oliver Chen has given his Hold rating due to a combination of factors influencing Ermenegildo Zegna’s current market position. The company’s direct-to-consumer (DTC) segment has shown positive growth, with a notable increase in year-over-year sales, reflecting strong customer engagement and product appeal. However, the wholesale segment has experienced a significant decline, which Zegna plans to address through strategic rationalization by the end of the year.
Despite the positive performance in the Americas, with sales up nearly 10% year-over-year, the Chinese market has faced challenges with reduced traffic and a slower recovery, impacting overall sales figures. The appreciation of the Euro against the USD and RMB has also negatively affected reported results. While Zegna’s valuation remains modest, Chen prefers to maintain a cautious stance, awaiting clearer prospects for growth in the Thom Browne brand, improvements in the Chinese market, and the successful execution of wholesale strategy adjustments.