Strong First-Half Rebound at Campari, but Shares Frothy and Leave No Margin for Execution Error

The backdrop heading into narrow-moat Campari Group’s first-half earnings print was auspicious, with a sustained rally in the stock ostensibly propelled by resilient spirits consumption trends in off-premises channels, along with increasing investor optimism around the prospects for a strong on-premises rebound in key markets like Italy. The firm ultimately delivered robust results, ahead of our expectations on both the top and bottom lines, which is sure to provide grist for the bulls and may further fuel the market’s exuberance. We plan to raise our EUR 8.70 fair value estimate by a single-digit percentage to reflect time value as well as strong commercial execution thus far this year. Nevertheless, the shares still look to be priced for perfection, in our view, and we’d recommend prospective investors remain on the sidelines.