Luxury goods momentum 'may fade', Credit Suisse downgrades Burberry

(Sharecast News) - Credit Suisse downgraded Burberry to 'neutral' from 'outperform' on Friday and cut it target price to 2,100p from 2,200p as the luxury retailer is "lacking near-term catalysts" and signs the momentum in luxury goods demand may fade.With the share price up 40% since February's lows mainly thanks to the appointment of creative director Riccardo Tisci as "and the absence of bad news", the shares are now trading close the new target price.The Swiss bank, which adjusted its forecasts to £450m adjusted operating profit for the full year and 3% like-for-like sales growth in the second quarter, said it continued to believe Burberry "can be a successful turnaround", with a the main moving parts in place, including a new management team, a new creative director and a cost savings program underway.Early results with regards to consumer engagement are "encouraging" with the number of Instagram likes more than doubling around the latest fashion show compared to the previous four."But after a year of changes the stock is lacking near-term catalysts. Product drops and capsule collections are here to create the buzz and management made it clear again during a sell-side store visit on Wednesday that it will take 2-3 seasons before seeing a meaningful impact on LFL."Moreover, Burberry "may be against a more challenging environment for luxury goods than two years ago", with analysts starting to see "signs that would suggest the momentum in luxury goods demand may fade" from the second half of the year. 2H(see Where are we in the cycle? published on 06-Sep-18).? Valuation continues to be challenging. The stock is trading at 25x CY19e P/E against 19x for our luxury universe for verylimited EPS growth. Our target price comes down to 2,100p due to the derating of luxury peers. Risks include fashion miss,management instability and M&A.