TLDR
- Morgan Stanley cut Kering to “equal-weight” from “overweight,” lowering its price target to €320 from €330.
- The stock fell over 3% on Monday following the downgrade.
- The bank cited limited upside after a strong year-to-date run, saying the outperformance is now “priced in.”
- Gucci, Kering’s flagship brand, is forecast to see sales decline 6.2% in Q1 2026 — worse than prior estimates.
- The downgrade lands days before Kering’s Q1 2026 revenue update on April 14 and a Capital Markets Day on April 16.
Kering stock took a hit on Monday after Morgan Stanley pulled back its positive outlook on the French luxury group, downgrading it just days ahead of key earnings events.
The bank moved its rating from “overweight” to “equal-weight” and trimmed its 12-to-18-month price target from €330 to €320. The stock fell more than 3% on the news.
Morgan Stanley’s reasoning was straightforward: Kering had a strong run, outperforming rivals LVMH, Hermès, and Richemont by 300 to 1,700 basis points since the start of the year. That rally, the bank said, has eaten up most of the available upside.
“Our DCF implies 15% upside to the shares, which no longer translates into relative outperformance,” Morgan Stanley wrote in the note.
The stock hit a year-to-date high of €320.50 on January 12, then slid roughly 16% through Monday. It had surged 10.90% on February 10 — its biggest single-day gain in the period — only to give back much of that in a sharp two-day drop of 5.04% and 6.35% on March 2 and 3.
Gucci Still the Sticking Point
Gucci remains the central concern. Morgan Stanley now models the brand declining 6.2% in Q1 2026, worse than its prior estimate of a 5% drop. For the full year 2026, Gucci is forecast to generate €5.95 billion in revenue, rising to €7.67 billion by 2028.
The analysts described the situation bluntly: “a classic case where improving buzz is running ahead of the hard numbers.” Channel checks across European retailers showed “early signs of improving brand buzz but little evidence yet of a meaningful commercial recovery.”
The weaker outlook was also shaped by softer Q1 channel checks and Kering’s exposure to the Middle East conflict, which accounts for roughly 5% of total sales.
Timing and What Comes Next
The downgrade lands at a sensitive moment. Kering is due to report Q1 2026 revenue on April 14, followed by a Capital Markets Day on April 16. Both events will test whether management’s recovery story is gaining traction with the market.
Morgan Stanley revised its 2028 EPS estimate down 4% to €15.97, still 15% above Visible Alpha consensus of €13.80. On that figure, the stock trades at roughly 17 times forward earnings.
The bank projects group sales reaching €18.3 billion by 2028, up about 25% from 2025’s €14.7 billion. Consolidated operating margin is expected to expand from 12.5% in 2026 to 18.4% by 2028.
Morgan Stanley’s bull case stands at €480, banking on a Gucci super-cycle and group margins hitting 25.9% in 2028. The bear case is €175, based on the new aesthetic failing to find a commercial audience. Options markets currently price a roughly 28.9% chance the stock tops €320 over the next 12 months, and a 17.1% chance it falls below €175.
The bank flagged two things that could bring it back onside: continued restructuring under CEO Luca de Meo, who took the top job in September 2025, and clearer evidence of a real commercial recovery at Gucci.
Worth noting: Morgan Stanley had upgraded Kering in October 2025, calling it one of its preferred European luxury names and backing the sector’s “burst of creativity.” Monday’s move marks a full reversal of that position.
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