Oliver Chen, an analyst from TD Cowen, has initiated a new Hold rating on Ermenegildo Zegna (ZGN).
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Oliver Chen’s rating is based on several strategic considerations and market conditions affecting Ermenegildo Zegna. The company is undergoing significant changes, including the integration of newly acquired brands Thom Browne and Tom Ford, which are expected to impact financial performance through FY25, seen as an investment year. These integration efforts could constrain short-term gains as the company focuses on long-term growth strategies.
Chen anticipates that achieving the company’s original targets of over 10% revenue growth and a 20% EBIT CAGR may take longer than initially expected. He projects a more modest medium-term growth with a sales increase of mid-single-digits and an annual EBIT margin expansion of over 100 basis points. Key areas of focus include enhancing store productivity, evaluating the luxury demand in China, and the market’s reception to new products from Tom Ford under its new Creative Director. Additionally, the Zegna brand’s performance, which constitutes a significant portion of revenue and EBIT, heavily influences the overall stock outlook, emphasizing the importance of its strategic initiatives like the One Zegna strategy and targeting high-spend customer segments.