Goldman Sachs moved Zegna's recommendation to Neutral from Buy on Wednesday, while increasing its 12-month price objective to $14 from $13.30. The bank said the company's recent share-price appreciation has largely incorporated the drivers behind its bullish view, leaving less upside at current levels.
Shares of the Italian luxury group have climbed 39% year-to-date and have gained roughly 60% over the prior 12 months. That performance outpaced luxury peers and the STOXX600 by 57 percentage points and 44 percentage points, respectively, over the same period.
The stock closed at $14.49 on June 16, making Goldman Sachs' revised target approximately 3.4% below the last closing price. In explaining the shift in stance, Goldman's analysts wrote: "With the core elements of our thesis increasingly reflected in the valuation, we see a more balanced risk‑reward at current levels and therefore downgrade to Neutral."
Goldman identified several specific factors that drove Zegna's outperformance. These include stronger growth at the Zegna brand among high-end consumers, a reduction in the group's exposure to China as the United States gains share, and a continued pivot toward direct-to-consumer (DTC) sales. Goldman noted that DTC now accounts for 82% of group revenue.
The bank said its 12-month price target continues to be grounded in a discounted cash flow model that uses a 9.5% weighted average cost of capital and a 3% terminal growth rate, parameters that are unchanged from the prior assessment.
On forecast measures, Goldman left its revenue projections for 2026 through 2028 largely intact and raised its adjusted EBIT margin forecasts for 2026-2029 by up to 30 basis points. The firm estimates group adjusted EBIT for 2026 at 87 million, which aligns with Visible Alpha consensus range of 85 million to 90 million.
Goldman's 2027 adjusted EBIT estimate sits at 239 million. That figure falls short of Zegna management's guidance range of 250 million to 300 million, while remaining above the analyst consensus of 231 million.
Valuation metrics also informed Goldman's reassessment. The stock trades at 34 times estimated 2026 earnings and declines to 25 times for 2027 estimates. Those multiples are above the sector averages of 26 times for 2026 and 22 times for 2027, when excluding Hermes and Brunello Cucinelli, according to Goldman. On an enterprise value-to-EBIT basis, Zegna is at 16 times its 2026 estimate, slightly below the sector average of 17 times.
Using a sum-of-the-parts framework that applies an 18-times EV/EBIT multiple to the core Zegna brand and assumes immediate profitability improvements at Thom Browne and Tom Ford Fashion, Goldman calculated a 16% upside to the group's market-implied enterprise value of .36 billion. In Goldman's scenario analysis, the bear case showed no upside and the bull case indicated 26.8% potential upside.
Performance since the stock's addition to Goldman's Buy List on Jan. 10, 2024 was mixed versus broader markets. Zegna shares rose 34% from that date, compared with a 58% gain in the S&P 500 and a 41% increase in the STOXX600, while luxury peers were effectively flat over the same interval.
Key takeaways
- Goldman Sachs downgraded Zegna from Buy to Neutral and raised its 12-month price target to $14.
- Stock performance has outpaced peers and indexes, driven by brand growth, a shift in geographic exposure, and a heavy DTC sales mix (82% of revenue).
- Most revenue forecasts were unchanged; adjusted EBIT margin forecasts for 2026-2029 were nudged higher by up to 30 basis points.
Implications
The note highlights a more balanced risk-reward at current valuations, reflecting both the improved margin outlook and the market's pricing-in of core growth drivers.