Puma Share Risk/Reward ‘Asymmetric’ Says Bernstein

Bernstein recently initiated coverage of Puma (ETR:PUM) with an Outperform rating, setting a EUR 24 price target. The firm suggests Puma is approaching the nadir of its brand cycle, creating an “asymmetric” risk/reward profile for investors. This suggests the potential upside outweighs the downside risk at current trading levels.

This positive assessment contrasts with recent mixed sentiment from other analysts. JPMorgan lowered its price target on Puma to EUR 16 from EUR 21, maintaining an Underweight rating. Just prior, JPMorgan downgraded Puma to Underweight from Neutral, citing execution risks associated with the company's turnaround plans.

UBS upgraded Puma to Neutral from Sell, raising the price target to EUR 20.90 from EUR 16.30. UBS acknowledges recent speculation about a potential sale by Artemis, the Pinault family's holding company, but emphasizes that fundamentals “might be temporarily overlooked in the near-term.” DZ Bank also upgraded Puma to Hold from Sell over a week ago.

Artemis, which controls Gucci-owner Kering, clarified its position regarding its 29% stake in Puma. A source close to Artemis told Reuters that the firm will not sell its stake at the current market value and is not currently engaged in deal talks. This statement follows earlier reports that Artemis was exploring potential buyers for its Puma stake, valued around $960 million.

The conflicting analyst opinions and Artemis' stance create uncertainty in the market. Bernstein's “asymmetric” risk/reward argument hinges on the belief that Puma's brand cycle is bottoming out, implying a potential rebound in performance.

JPMorgan's downgrade reflects concerns about the execution of Puma's turnaround strategy. The firm's reduced price target indicates a lack of confidence in Puma's ability to meet expectations.

UBS's upgrade acknowledges the potential for near-term market volatility stemming from sale speculation. However, the firm suggests that Puma's underlying fundamentals could be temporarily undervalued.

Artemis' clarification adds another layer of complexity. While a potential sale could have provided a short-term boost, Artemis' decision to retain its stake suggests a longer-term perspective on Puma's value.

The current market sentiment toward Puma is characterized by uncertainty and disagreement. Bernstein's Outperform rating offers a counterpoint to the more cautious views of JPMorgan. Investors should carefully consider the various perspectives and assess Puma's turnaround plan before making investment decisions.