Burberry share price analysis ahead of Thursday’s first-half results
Luxury fashion brand Burberry has faced challenges in recent months, from falling sales to FTSE 100 ejection. But could recent takeover speculation signal a turnaround?
Recent performance of Burberry shares
After being ejected from the FTSE 100 in September 2023, Burberry's share price fell by over 70% to its 555.60 pence September 2024 low but has since shown signs of life following takeover speculation involving Italian luxury brand Moncler.
Burberry share price weekly candlestick chart
Just last week the British luxury retailer saw its shares jump 6% on the rumours, suggesting investors believe consolidation could help address recent challenges.
However, the share price remains well below its 2023 peak, reflecting ongoing concerns about luxury market weakness, particularly in key Asian markets.
For investors considering whether to buy shares in Burberry, understanding these recent developments is crucial.
Understanding Burberry's current valuation
Current analysis suggests Burberry shares may be trading below their intrinsic value, with some models indicating a fair value around 1,250p. Value investors may find the current price-to-intrinsic value gap interesting as an entry point.
Analyst ratings for Burberry
Refinitiv data shows a consensus analyst rating of ‘hold’ for Burberry with 1 ‘strong buy’, 2 ‘buys’, 12 ‘hold’, 4 ‘sell’ and 1 ‘strong sell’ – and a mean of estimates suggesting a long-term price target of 701.11 pence for the share, roughly 3% lower than the current price (as of 12 November 2024).
Burberry TipRanks Smart Score
TipRanks rates the Burberry share as ‘underperform’ with 2 ‘buy’, 7 ‘hold’ and 4 ‘sell’ (as of 12/11/2024).
TipRanks Smart Score and Analyst Consensus graphs
Technical outlook on the Burberry share price
Burberry’s share price has been rapidly falling from its April 2023 peak at 2,656 pence, by around 56%, with further possible downside taking it towards the psychological 1,000p region.
Burberry weekly candlestick chart
Despite its recent takeover-rumour-generated spike, the Burberry share price remains with its 2023-to-2024 downtrend, having last week been rejected by it at 877.8p. Since then the Burberry share price has slipped by over 16%.
Burberry daily candlestick chart
Potential support can be seen along the 55-day simple moving average (SMA) at 681.2p and the September-to-November uptrend line at 659.6p.
For a medium-term recovery to be on the cards, the early November high at 877.80p would need to be exceeded on a daily chart closing basis, something which looks technically unlikely for the time being as the clear long-term downtrend has the upper hand as can be seen by the (orange) downward sloping 200-day simple moving average (SMA) at 945.8p.
Key challenges facing Burberry
Burberry's recent struggles stem primarily from weakening luxury demand in Asia, particularly China, where sales fell 21% year-on-year (YoY).
The company has also faced significant leadership turnover, creating uncertainty about strategic direction and execution.
These headwinds led to a 21% overall sales decline in the second quarter (Q2) of 2024 and the suspension of dividend payments, shocking many income investors.
The Asia-Pacific region remains crucial, with its significant sales drop highlighting the impact of regional economic challenges.
Potential Moncler takeover implications
Moncler's potential interest in Burberry has excited investors due to the Italian brand's strong track record in outerwear.
The possible combination could help refocus Burberry on its core outerwear category, moving away from its recent emphasis on fashion and leather goods.
Moncler's marketing expertise, achieved without luxury-conglomerate budgets, could prove valuable for Burberry's brand development.
Any deal could provide the strategic reset Burberry needs to address its recent challenges and revitalise growth.
Future outlook and investment potential
Near-term profit forecasts remain challenging, with analysts expecting significant declines over the next few years.
However, current valuations may already reflect much of this negative outlook, potentially limiting downside risk.
Long-term investors might find opportunity in the current uncertainty, particularly if the Moncler speculation leads to concrete developments.
For those considering opening a share dealing account, Burberry's mix of challenges and opportunities warrants careful consideration.
How to invest in Burberry shares
- Research Burberry's financials, market position, and growth strategy thoroughly before investing
- Open a share dealing account with IG to access UK shares
- Search for 'Burberry' or its ticker 'BRBY' in our platform or mobile app
- Decide how many shares you want to buy or how much you want to invest
- Place your trade and monitor your investment
Remember that all investing carries risk, and past performance doesn't guarantee future returns. Always consider your investment goals and risk tolerance before making investment decisions.
This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.
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