Burberry Group plc : Luxury brands are too expensive
By Oscar Salza
Entry price | Target | Stop-loss | Potential |
---|---|---|---|
GBX 1,528 | GBX 0 | GBX 1,592 | +100% |
The sector’s growth is driven by Asia markets, especially by China. In 2011, Burberry’s revenues is composed by the Far East markets for 33% up 60% compared 2010. The British brand is among luxury companies more exposed in China with fifty stores compared an industrial average of 30. Since 2009, Burberry’s stock outperformed regularly the Bloomberg Luxury Goods Index; at this price the stock is too expensive with a current price earnings ratio of 26.86x, against a sector average of 21 (price earnings ratio average of luxury industry is superior than other industry), according to Bloomberg.
Technically, in daily data the recently acceleration could be explained by double-bottom set up between November and December. Besides, we can see a technical pattern of “double-top”. In fact the share is testing the GBp 1572 long-term resistance, tested last February. In weekly data we may see a 20 periods moving average’s turmoil. In this scenario could imagine a technical correction towards GBp 1461 at first moment, and then GBp 1138. A stop loss is necessary at GBp 1592, in order to cover position.