Deutsche Bank has updated its outlook on Hennes & Mauritz AB (HMB:SS) (OTC: HNNMY), raising the price target to SEK200 from SEK180 and reiterating a Buy rating. The bank's analysis highlights the company's strong current trading in September and a positive outlook for the upcoming quarter.
The market is optimistic about H&M's performance, looking beyond a potentially weaker third quarter to focus on a robust September. The initial Buy rating in July anticipated a recovery in constant currency sales growth, outweighing concerns about margin expansion.
Deutsche Bank's analyst is encouraged by the start of the autumn/winter season, suggesting a potential upside in gross margin performance for the fourth quarter. This improvement could help offset increased marketing investments by H&M.
The bank's confidence in constant currency sales growth is seen as a key factor in mitigating any third-quarter EBIT shortfall. Deutsche Bank has raised its September sales growth forecast to 12% and adjusted the fourth quarter prediction to 6.5%, leading to a 2% increase in forecasted earnings per share for fiscal year 2024.
The new price target of SEK200 is based on a projected 20.5 times the calendar year 2025 P/E ratio, reflecting an estimated 13% EPS growth.
Analysis:
Deutsche Bank's optimistic outlook on H&M's performance and raised price target indicate confidence in the company's growth potential. Investors may view this as a positive sign, leading to increased interest and potential stock price appreciation. The forecasted earnings per share growth for fiscal year 2024 suggests a strong financial performance ahead, making H&M an attractive investment opportunity.