Bank of America upgraded three luxury stocks that are bucking the negative trends afflicting the broader sector in Europe. The MSCI Europe luxury index has fallen 16% from its most recent high on Apr. 24 as evidence emerges of slowing demand in the third quarter. The investment bank expects profit margins to decline by one percentage point for the sector even as third-quarter revenue is seen growing modestly. Bank of America made seven rating changes in the sector.
However, Wallace also cautioned investors to wait before buying the dip. "The sector is cheap, however in the absence of positive China macro/stimulus it's unclear what will drive a re-rating in the near term," she added. Pandora Wallace lifted her price target to 900 Danish krone from 720 krone, giving the stock 27% upside potential over the next 12 months.