Johann Rupert tripled Richemont's earnings in five years, but the stock is down 9%. Analysts say that is the opportunity

Johann Rupert has spent five years building Richemont into a more focused, more profitable and more direct-to-client luxury business. The stock market has not noticed yet. Analysts say that is precisely the point.

Richemont's Zurich-listed shares are down approximately 9% over the past year, significantly outperforming LVMH, which has declined roughly 27%, but still flat against a backdrop of earnings that have tripled since 2021. The disconnect between operational performance and share price is the investment case Chantal Marx, head of research at FNB Wealth and Investments, laid out to Business Day TV this week.

"I think they are an exceptionally well-managed company. They play in a cool part of the market not necessarily exposed to economic cyclicality," Marx said. "The valuation looks decent, and the stock has not performed well over the last six months or so. It is a good entry point for a long-term investor."

The numbers behind that view are compelling. In its fiscal year 2026 results published May 22, Richemont reported sales of €22.4 billion ($26 billion), up 11% at constant exchange rates, beating analyst consensus of 9.78% growth. Net profit jumped 27% to €3.5 billion ($4.1 billion). The jewelry maisons, which include Cartier, Van Cleef and Arpels and Vhernier, generated €16.5 billion ($19.2 billion) in sales with an operating margin of 30.5%. Critically, nearly 80% of that segment's sales are now direct to client, giving the brands significant control over supply, pricing and how products are marketed, a structural advantage that insulates margins from the volatility of wholesale-dependent peers.

The consensus among 26 analysts covering Richemont is Buy, with 17 recommending the stock, none advising a sell and nine on hold. The average 12-month price target on the Zurich-listed shares is CHF 181.30 ($203), implying upside of approximately 15% from current levels.

The transformation Rupert has engineered at Richemont over the past five years is structural, not cyclical. The group sold Yoox Net-a-Porter to Mytheresa in 2024, removing a persistently loss-making digital retail business that had weighed on reported earnings and distracted management. It sold Baume and Mercier in January 2026, citing the brand's wholesale-heavy distribution model as incompatible with Richemont's evolving strategy of protecting brand equity through controlled scarcity. In its place, Rupert has invested heavily in upgrading retail boutiques globally and driving direct-to-client sales across both its jewelry and watch businesses.

The watchmaking division, historically a wholesale business, is catching up. Direct-to-client sales now account for over 65% of watchmaking revenue, up from significantly lower levels five years ago, as Richemont has opened its own boutiques for brands including IWC, Vacheron Constantin and Jaeger-LeCoultre and invested in online channels.

Marx pointed to a specific catalyst for the watch business that has received little coverage. "In watchmaking, there have been a few interesting developments. Swatch launched a pocket watch this week that actually caused riots," she said. "There does seem to be a shift back towards analogue watches. Richemont are the absolute market leader in fine luxury watches, so there is scope for that to pick up in the next year or two."

The reason the share price has not responded to any of this is not complicated. The Middle East conflict that erupted in February 2026 struck the luxury sector hard, diverting wealthy travelers, disrupting Gulf retail and weighing on investor sentiment toward any business exposed to the region. LVMH reported that the conflict produced a shortfall and deterioration in demand of between 30% and 70% across various Middle East malls and businesses in March alone. Richemont, with its Americas-heavy jewelry business, was more insulated than most, but the sector-wide de-rating pulled it lower regardless.

"The top line is growing very strongly. It exceeded expectations, and momentum is very strong in that jewellery business," Marx said. "Richemont's non-jewellery brands are increasingly coming to the fore and driving strong growth for the company."

Rupert's own assessment of where the business stands was unambiguous when he addressed analysts after the results. The balance sheet holds €8.5 billion ($9.9 billion) in net cash. Earnings have tripled since 2021. The group is in what he called the best operational shape he has ever seen it. The share price has not caught up. For long-term investors, that gap is the opportunity.