BUZZ-Luxury stocks to see many ups and downs in 2025, BofA says

"Like a game of snakes & ladders, we think luxury will see many ups & downs this year," BofA says, as the sector is past the worst of the revenue decline but faces continuously muted demand

The sector faces cyclical and structural pressures, BofA says, with weakness in demand, declining volumes and prolonged recovery in China

The industry needs creativity, fashion content and newness to drive higher engagement, it says

BofA sees France's LVMH LVMH.PA as an industry leader that will benefit from demand clarity over the next 12-18 months - ups stock to 'buy' from 'neutral'

It also ups Richemont CFR.S and Zegna ZGN.N to 'buy', citing continued brand momentum and jewellery outperformance for the former and underappreciated earnings growth potential for the latter

It cuts Kering PRTP.PA and Watches of Switzerland Group WOSG.L to 'underperform', pointing to pressured earnings at Kering and "ambitious" FY guidance with challenged profitability at WOSG

BofA expects American consumers to drive over 50% of 2025 revenue growth, while Chinese luxury spending remains flat

The sector trades at a 23x P/E, reflecting mid-cycle valuation with potential for upward movement if earnings downgrades cease or revenue confidence improves

(Reporting by Hugo Lhomedet)

((hugo.lhomedet@thomsonreuters.com))