After years on the sidelines, Morgan Stanley is finally joining the bulls pushing Hermes International shares to record highs.

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The broker upgraded the maker of Birkin and Kelly handbags to overweight on Wednesday, its first positive rating for the stock since initiating coverage in 2018.

Hermes’ focus on the wealthiest clients has shielded it from the broader sector’s downturn, brought about by dampened demand from Chinese shoppers and slower growth in other key markets. The stock has risen more than 5% so far this year after gaining about a third in 2023, significantly outperforming a gauge of European peers.

“While we expect most personal luxury-goods brands to face subdued demand and have limited pricing power over the next 18 months at least, Hermes stands out,” Morgan Stanley analyst Edouard Aubin wrote in a note. “We see consensus expectations over the coming years as too low.”

Hermes shares are set for a new high after rising as much as 1.4% in Paris.

Aubin’s price target of €2,380, now the highest on the Street, implies gains of 18% over Tuesday’s close. It’s standing out as a particularly bullish call when the average analyst target predicts that Hermes shares will fall about 2% over the next 12 months.

Aubin expects Hermes to especially benefit from a trend where Chinese consumers are trading up by cutting spending on more affordable brands to purchase “the one luxury piece that conveys true status.”

A second driver is the trend where affluent shoppers’ spending power is less impacted by economic headwinds than that of the middle class, Aubin said.

His only other buy rating in the sector is for Prada SpA, with bellwether LVMH at equal-weight, according to data compiled by Bloomberg.

Hermes will report annual results on Friday.