Prada: Outperforms Peers on Strong Momentum, Which We Don't See Persisting; Shares Fairly Valued

We are maintaining our fair value estimate of HKD 51 per share for narrow-moat Prada as the company reported strong first-quarter sales boosted by continuing positive brand momentum. We believe shares are fairly valued, trading at 24 times forward earnings. We think its current performance is helped by the favorable fashion cycle, which we don’t extrapolate being longer than a few years as fashion cycles tend not to last and sometimes revert themselves. For example, the poor performance of Prada from 2014-19 and Kering’s Gucci weakness currently.