On Friday, HSBC maintained a Buy rating on Pandora (OTC:PANDY) A/S (PNDORA:DC) (OTC: PANDY) stock and raised the price target to DKK1,400 from DKK1,350.
The firm's analyst highlighted that the company's organic growth in the first half of 2024 was driven by increased sell-in to third-party retailers, which might lead to a technical reversal impacting growth by about two percentage points—a factor possibly overlooked by the consensus.
The analyst anticipates a 9.5% increase in organic growth for the third quarter, which is slightly below the consensus estimate of 10.5%. This projection includes a 6% rise in like-for-like sales, which is a slowdown from the 9% increase in the first half of the year.
The tougher comparisons in the second half of the year have been taken into account for this forecast. Additionally, the analyst expects a 5% contribution from new space, aligning with the upper end of the company's guidance.
Despite the anticipated deceleration in organic growth compared to the first half of 2024, which saw a 16% increase, Pandora's performance is still considered stronger than most luxury companies covered by HSBC.
The analyst also suggested that the Essence collection, launched in the middle of the second quarter, could potentially exceed expectations, along with new space contributions that might surpass the guidance range, similar to what occurred in the second quarter.
In other recent news, Pandora A/S has seen a shift in financial outlook from several major firms. RBC Capital has reduced its price target for Pandora shares, maintaining an Underperform rating. This adjustment reflects second-quarter forecasts, which anticipate a 7% increase in retail sales and the launch of the Essence collection, potentially increasing operational expenditures.
Rising commodity prices, expected to increase costs by approximately 260 basis points, have also influenced RBC Capital's full-year 2025 forecasts.
Pandora's earnings before interest and taxes (EBIT) are now estimated to be 9% lower than RBC Capital's previous calculations and 10% below consensus. This adjustment is a response to current market conditions and Pandora's operational strategies.
In contrast, Citi has slightly increased its price target for Pandora, maintaining a Buy rating. They emphasize Pandora's efficient crafting and supply operations in Thailand, which have consistently maintained a high gross margin exceeding 80%.
Jefferies has also raised its stock target for Pandora, keeping a Hold rating, in anticipation of the company's first-quarter results. These recent developments reflect the dynamic financial landscape for Pandora.
InvestingPro Insights
As HSBC maintains a bullish stance on Pandora A/S (OTC: PANDY), investors might consider the additional insights from InvestingPro. Notably, Pandora boasts impressive gross profit margins, which is a strong indicator of the company's ability to manage its cost of goods and maintain profitability. This aligns with the analyst's positive outlook on the company's organic growth and operational efficiency.
While Pandora is trading at a high P/E ratio relative to near-term earnings growth, suggesting a premium valuation, it's essential to note that the company is a prominent player in the Textiles, Apparel & Luxury Goods industry. This stature could justify a higher valuation, especially if investors expect the company to continue outperforming its peers. Additionally, Pandora has maintained dividend payments for 14 consecutive years, which could be appealing to income-focused investors.
For those interested in a more detailed analysis, InvestingPro offers additional tips on Pandora, including insights into the company's stock price volatility, debt levels, and profitability projections for the year. With a total of 11 InvestingPro Tips available, investors can gain a comprehensive understanding of Pandora's financial health and market position by visiting https://www.investing.com/pro/PANDY.
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