COVID-19 Resurgence Stymies Campari's Momentum in Q4; Long-Term Intact, but Shares Rich

Heading into narrow-moat Campari Group’s fiscal 2020 earnings, with the resilience in its stock belying adverse implications of the resurgence in coronavirus cases across its key markets, we think investors were looking for signs of ongoing momentum in countries like the U.S., as well as recovery indicators in Italy. While there were traces of positive evidence in which bulls could take comfort, the overall results were mixed, with revenue coming in light and profits roughly in-line relative to our expectations. We plan to raise our EUR 7.90 fair value estimate by a high-single-digit percentage to reflect time value after rolling our model as well as near-term puts and takes as the distiller navigates volatile on-premises channels across its markets. Nevertheless, the shares still look to be priced for perfection, in our view, and we’d recommend prospective investors remain on the sidelines.