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(Sharecast News) - JPMorgan downgraded Burberry to 'underweight' from 'neutral' on Friday as it took a look at the European luxury goods sector, noting that that after a "tough" 2024 and "volatile" 2025, 2026 should mark a year of stabilisation for the luxury sector.
It noted that for the first time in two years, it models a return to low single digit percentage growth for the sector in 2026, though this remains below historical averages of high single digits.
"The improvement should be supported by the easy base of comparison, a slight uptick in Chinese consumer confidence, and more product newness which should, at least partly, help to address the consumer fatigue in soft luxury," JPM said. "However, with continued macro uncertainty, muted price/mix contributions and a consumer that is increasingly discerning, we anticipate polarisation among brands and categories to remain elevated."
As such, JPM thinks consensus "might be too optimistic" on the improvements expected at Burberry for next year and beyond. However, it did lift its price target on Burberry to 950p from 850p.
Analysts at Citi raised their target price on tobacco giant British American Tobacco to £48.50 on Friday, stating it expects the firm's 2026 growth performance to surprise to upside.
Citi said BAT remains its top-pick in the beverages and tobacco space, with the group well-placed to deliver at the upper-end/slightly above FY25E consensus revenue expectations.
Moreover, Citi said it continues to see scope for both positive earnings momentum and a further re-rating in FY26. Importantly, Citi said BAT's 9 December pre-close trading update should provide further confidence that the group was on-track to deliver its mid-term growth algorithm and highlight the further re-rating opportunity.
Citi also reiterated its 'buy' rating on the stock.
Berenberg has slashed its target prices across the UK gambling and betting sector as a result of downgrades to estimates driven by this week's Autumn Budget.
The broker lowered its target price for Flutter Entertainment from 24,200p to 18,100p, for Entain from 1,400p to 1,200p, and for Evoke from 95p to just 33p. While Flutter and Entain were still rated 'buy', Evoke's recommendation was cut to 'hold'.
On Wednesday, chancellor Rachel Reeves announced a raft of tax-raising measures, including an increase in the remote gaming duty from 21% to 40% as of April 2026, and an increase in the remote betting duty (excluding horse racing) from April 2027.
All three companies lambasted the move, announcing that the increased duties will hit bottom lines by nine-figure amounts over the coming years. William Hill owner Evoke, in particular, claimed the hikes will result in "thousands of industry-wide job losses and increase customer activity on the unregulated black-market", ultimately reducing the overall amount of tax paid by the gambling industry.
According to Berenberg, the changes will drive "meaningful downgrades" for Evoke, given the importance of the UK market to the business, as well as increase the company's leverage.
By contrast, Berenberg believes the news will remove the overhang weighing on Entain's shares, despite estimates having to be cut, given the stock has traded lower in the run-up to the Budget. As for Flutter, the company is still poised to deliver "meaningful growth over the coming years and sustained shareholder returns", the broker said.