Investing.com -- UBS analysts said this week that investor sentiment toward luxury stocks in 2025 remains cautiously optimistic, with selective opportunities rather than broad-based enthusiasm.

After speaking with over 150 investors, UBS notes that while early earnings beats from Richemont (SIX: CFR ) and Burberry (LON: BRBY ) sparked initial optimism, sentiment has since become more measured.

"By now investors seem to have concluded that the improving trends in the market may not benefit all brands to the same extent," UBS wrote, emphasizing the importance of stock picking.

UBS says jewelry and high-end consumer exposure remain preferred segments, with Richemont and Hermès standing out as investor favorites.

"Following Richemont's solid Q3 FY25 sales, we believe the stock is consensually liked by most investors," UBS stated, adding that despite its 27% year-to-date gain, few question further upside given its earnings visibility and business transformation.

Investor sentiment toward Hermès is said to be similarly strong, with expectations for a robust Q4 performance ahead of its upcoming earnings report.

However, some of the sector's largest names remain sources of debate, according to the bank.

UBS highlighted concerns around LVMH due to slowing organic sales growth and margin weakness, with even bullish investors questioning its ability to maintain historical outperformance.

Moncler remains attractive for its high margins, but there are worries about slowing revenue growth amid rising competition, says the bank.

Meanwhile, they note that EssilorLuxottica is well regarded, but its valuation has become a point of contention, with UBS commenting that "many worry that it has become more of a 'concept' stock amid the smart glasses long-term potential."

UBS adds that investor interest in Kering (EPA: PRTP ) and Swatch appears muted. For Kering, the bank attributes this to delays in Gucci's turnaround following the departure of creative director Sabato de Sarno, years of negative EPS momentum, and recent balance sheet concerns.

“Following a solid start to the year, the luxury goods sector now trades at a ~76% premium to MSCI Europe , back in-line with its 5-year relative avg (~ 78% and 15-year avg 58%), which suggests we may need to pause for breath, amid still volatile and polarised context and uncertain sales growth trajectory,” concluded UBS.