Buy these 'cheap' stocks, Barclays says, as luxury's 'self-help stories' pay off

The conflict in the Middle East has weighed heavily on the world's biggest luxury stocks , but Barclays sees a buying opportunity with the sector now offering the best value in a decade. Barclays sees upside in "self-help stories" such as LVMH and Gucci-owner Kering , as well as "favors companies" with higher exposure to the jewelry and American consumers, the bank wrote in a note published on Monday. It came as Barclays transfers coverage of luxury stocks to analyst Viktoria Petrova, who predicts the sector will return to about 3% revenue growth this year, then stabilize at 4% growth through 2029. Bullish analysts hope 2026 will offer an inflection point for luxury stocks, with the sector returning to growth after four years of contraction. Concerns over a slowdown in current and future organic growth have left sector valuation multiples "well below their past decade average," Barclays noted. "Luxury's growth model has entered a new phase," it added. "The recent slowdown underscores a shift in consumer behavior and calls for a rethink of established strategic playbooks." Disruption from the Iran war is weighing on spending by luxury consumers in the Middle East, formerly one of the sector's few bright spots amid sluggish growth in former growth driver China and in Europe. Inflation risks and a more selective consumer have also added to the sector's woes. Winners of luxury's "new phase" Barclays upgraded LVMH to overweight and Kering to equal weight, citing a preference for "self-help stories," in a note published late Monday. The bank sees Kering's growth at above-market rates of 8% through 2028, as its turnaround under new CEO Luca de Meo bears fruit. It also predicted that the company, which also owns Bottega Veneta, Saint Laurent, and Balenciaga, will see its profit margin double by 2029, as it hiked its price target to 300 euros from 255 euros. In April, de Meo presented investors with Kering's highly anticipated new strategy, "ReconKering." He hopes to revive Kering's flagship brand, Gucci, after a year-long luxury slump that has hit it harder than its competitors. "The recovery case is driven by improved execution and discipline, rather than a fashion hit, supporting a balanced risk profile," Barclays said. MC-FR KER-FR,CFR-CH,RMS-FR 1Y mountain Luxury stocks' performance over the past 12 months. Meanwhile, Barclays hiked its price target for the biggest player in the space, LVMH, to 600 euros from 570 euros, citing turnarounds at Tiffany and Dior, boosted by creative resets. It sees above-average growth also for LVMH of 5.4% growth by 2029. On Richemont , Barclays maintained an Overweight rating, citing "extraordinary strength" and pricing power of its jewelry brands. "What's not to like?" the bank said, highlighting the Cartier-owner's jewelry leadership and noting that its current valuation doesn't account for its superior fundamentals. However, Barclays slashed its price target for market darling Hermes from 2,310 euros to 1,700 euros, maintaining an equal weight rating on the stock. Recent results raised concerns around Hermes' long-term growth model and questioned its high valuation versus peers. Hermes currently trades at 33 times forward earnings, compared to 31 for Kering, 24 for Richemont and 20 for LVMH.