(BFM Bourse) – The British bank has identified fourteen European stocks to favor for next year, notably Ferrari and Shell. Four French stocks are part of its selection.
Which European stocks should we bet on in 2025? The Barclays bank tried to answer this question, recognizing in passing that the policies of Donald Trump, who will return to the White House in January, will represent the greatest uncertainty.
“The election of Trump constitutes a regime change for the global economy and markets… The outlook depends largely on how Trump's economic policies play out,” she wrote in a recent note.
The establishment has identified 14 European stocks on which its analysts display “strong conviction”, regardless of the procrastination of Donald Trump's policies.
In this article we will discuss the four French stocks selected by Barclays, before briefly listing the other European stocks.
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Schneider Electric driven by mega-trends
In France, Barclays has opted for quality groups, which seem to progress every year, regardless of storms and tides.
This is the case of Schneider Electric and Saint-Gobain, the two biggest increases in the CAC 40 since January 1. The two stocks were already among the best performers on the Paris index in 2023.
For Schneider Electric, Barclays sums it up as follows: “all roads lead to Schneider Electric”. The product portfolio of the company specializing in energy efficiency technologies is at the heart of megatrends, namely the development of artificial intelligence and electrical infrastructure.
Schneider Electric is thus well positioned to benefit from the growth (13% per year by 2027) of investments in electrical equipment for data centers. Barclays even believes that Schneider's growth in this segment could reach 20% per year thanks to the launches of new products as well as its offering of software and associated services.
“Approximately 21% of revenues are exposed to data centers and networks, and Schneider has the most comprehensive portfolio among its peers (…) and is well positioned in the highest growth sectors, namely the United States and the cooling”, underlines the British establishment.
Saint-Gobain will further improve its margins
For Saint-Gobain, Barclays highlights the company's sales mix which is “attractive for 2025”. The French group notably offers greater exposure of its operating income to the United States market than its competitors. Additionally, its end markets (i.e. construction and renovation) are expected to benefit from rate cuts in Europe.
The bank is also seeing the first signs of Saint-Gobain's outperformance in terms of volumes, which began to improve in the third quarter. This is particularly due to the company's high value-added businesses, such as its construction chemicals branch.
Additionally, the company has room to improve its margins. “Regardless of volumes, our analysis is that Saint-Gobain has slightly above-average pricing headroom, a plan and a strong track record to further reduce costs (we see room for maneuver in Europe in particular), while the improvement in margins due to portfolio rotation seems likely to continue given recent acquisitions and the state of its balance sheet”, develops the establishment. Barclays sees the group's operating margin “soon” to be around “12%-13%”.
Hermès is essential
Barclays also selected Hermès, although its price target gives limited potential to the stock. “In a context of sectoral slowdown, due to cautious luxury spending by all customers and a difficult macroeconomic environment, particularly in China, we consider Hermès to be a strong defensive stock,” says the bank. This “due to its stronger revenue growth profile, brand desirability, exposure to high-end customers and overall consistent operating margin,” it continues.
Barclays argues in particular that Hermès has maintained a culture of scarcity which has allowed it to maintain its desirability. “While it can be difficult to track, our quarterly survey in collaboration with Vogue shows that in China, Hermès consistently ranks as the second most desirable luxury brand, trailing only Chanel,” the establishment points out.
This results in greater exposure to local customers and less to tourists (whose demand is more volatile) than its competitors. And its business model relies more on supply than demand for its products. Ultimately, Barclays expects Hermès to post growth of 13% in 2025 compared to 1% for the entire luxury sector.
Unibail for its American exhibition
Barclays' latest French stock pick is a little more surprising: it is shopping center operator Unibail-Rodamco-Westfield (URW). The main point in its thesis is that URW is heavily exposed to American shopping centers, which represent 21% of its net rents, and will thus benefit from an improvement in consumption in the United States, according to the bank.
This will require the company not to massively reduce its exposure to the country via disposals, as its management plans to do to reduce debt. Barclays is encouraging the group to change its opinion.
“We do not believe that the asset sales would significantly improve the group's debt ratios and believe that they would instead lead to a reduction in the group's profits,” argues Barclays. The bank instead recommends that URW increase the value of its assets and its operating profit by resorting to acquisitions financed by capital (shares), for example by buying out the shares of its partners in joint ventures (joint ventures). .
Furthermore, the stock is trading at depreciated valuation multiples compared to its comparables, adds Barclays. If Unibail-Rodamco-Westfield displays the highest level of debt within its sector, the bank believes that the market exaggerates this point, to the extent that the company does not face liquidity risk.
Apart from French stocks, Barclays recommends buying Ferrari, a “safe haven” within an automotive sector plagued by uncertainty, the airline group IAG (parent company of Iberia and British Airways) due to its exposure to the American economy or the pharmaceutical group Astrazeneca, citing its firepower in R&D and its attractive valuation.
The other stocks chosen by the bank are the insurer Zurich Insurance, the British bank Natwest, the mining company Anglo American, the oil major Shell, the semiconductor company BE Semiconductor Industries, the maritime equipment group for the oil industry and gas company SBM Offshore, and the specialist in high-precision measuring instruments Spectris.
Julien Marion – ©2024 BFM Bourse
