Rising Middle Class And IoT Trends Will Boost Premium Demand

Key Takeaways

• Accelerated growth in high-end coffee and smart appliance segments, supported by global marketing and innovation, positions De'Longhi for sustained premium pricing and expanded market share.
  
• Strong supply chain agility and risk management enhance margin resilience and enable strategic capital allocation, despite potential geopolitical or market pressures.
  
• Margin pressures, over-reliance on coffee machines, rising regulatory and sustainability costs, digital lag, and weak diversification leave De'Longhi vulnerable to shifting consumer trends and economic conditions.

Catalysts

Produces and distributes coffee machines, food preparation and cooking machines, air conditioning and heating, domestic cleaning and ironing, and home care products.

• Analyst consensus expects strong growth from the Professional division to enhance margins, but this may understate the impact-current visibility into La Marzocco and Eversys order backlogs indicates sustained double-digit growth and the potential for EBITDA margins to structurally exceed 25 percent group-wide, particularly as high-end coffee demand accelerates globally.
  
• While analysts broadly expect marketing and brand investments to drive revenue, the outsized scale and celebrity reach of De'Longhi's upcoming global campaigns could significantly amplify market share gains in North America and Asia, accelerating both volume growth and premium pricing power, thus positively impacting top-line revenue and net margin expansion.
  
• Leading category growth in China and Asia-Pacific is positioned to compound as rising middle-class wealth and evolving consumer behaviors increase adoption of premium at-home coffee solutions, supporting sustained double-digit revenue growth and geographic diversification well ahead of market expectations.
  
• De'Longhi's deepening innovation in connected and IoT-enabled appliances, coupled with category-leading launches and a broadening smart product portfolio, positions the company to be a dominant beneficiary as adoption of smart home technology becomes mainstream, underpinning both higher average selling prices and improved net margins.
  
• The group's proven agility in supply chain localization and risk management-including rapid inventory repositioning and sourcing diversification-means De'Longhi can both defend and expand margins even under ongoing tariff or geopolitical pressures, enhancing earnings resilience and providing room for opportunistic capital allocation such as value-accretive M&A and share buybacks.

De'Longhi Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more optimistic perspective on De'Longhi compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts.
• The bullish analysts are assuming De'Longhi's revenue will grow by 6.8% annually over the next 3 years.
• The bullish analysts assume that profit margins will increase from 8.8% today to 10.0% in 3 years time.
• The bullish analysts expect earnings to reach €443.1 million (and earnings per share of €nan) by about August 2028, up from €321.1 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 22.8x on those 2028 earnings, up from 14.1x today. This future PE is greater than the current PE for the GB Consumer Durables industry at 14.1x.
• Analysts expect the number of shares outstanding to grow by 0.49% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 11.49%, as per the Simply Wall St company report.

De'Longhi Future Earnings Per Share Growth

Risks

• De'Longhi faces intensifying margin pressure and input cost inflation due to rising global tariffs, new trade restrictions, and ongoing supply chain volatility, as evidenced by a projected €50 million negative impact from tariffs in 2025 and uncertainty about the effectiveness of pricing strategies in fully offsetting these impacts, which could compress both EBITDA margin and net earnings.
  
• The company's significant reliance on coffee machines and premiumization trends leaves it exposed to shifts in consumer preferences, heightened competition from new entrants such as Ninja in the US and potential entrants in fast-growing markets like China, as well as market saturation in mature economies, which risks future revenue growth slowing or even reversing.
  
• Growing regulatory scrutiny and consumer awareness around sustainability, particularly concerning electronic waste, could increase compliance costs or dampen demand for small appliances that are frequently upgraded or replaced, leading to sustained downward pressure on net margins.
  
• De'Longhi's slower progress in direct-to-consumer digital capabilities compared to more digitally adept competitors may hinder its ability to capture online sales growth and adapt to changing consumer shopping behaviors, potentially resulting in higher customer acquisition costs and lower revenue growth rates over the long term.
  
• Weakness in key non-coffee categories and regions-such as flat or declining sales in the US Nutrition segment and a lack of sustained growth in smaller product lines-suggests De'Longhi is vulnerable to cyclical downturns in consumer discretionary spending, which, if prolonged by macroeconomic stagnation or declining real wages, could result in lower consolidated revenues and thinner net profits.

Valuation

• The assumed bullish price target for De'Longhi is €47.7, which is the highest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of De'Longhi's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
  
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of €47.7, and the most bearish reporting a price target of just €30.0.
  
• In order for you to agree with the bullish analysts, you'd need to believe that by 2028, revenues will be €4.4 billion, earnings will come to €443.1 million, and it would be trading on a PE ratio of 22.8x, assuming you use a discount rate of 11.5%.
  
• Given the current share price of €29.84, the bullish analyst price target of €47.7 is 37.4% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.