We recently published a list of 12 Best Italian Stocks to Buy in 2025. In this article, we are going to take a look at where Ermenegildo Zegna N.V. (NYSE:ZGN) stands against other best Italian stocks to buy in 2025.

As per Deloitte, the broader Italian economy slowed down in 2024, with moderate growth. The service sector expansion was contrasted with continued weakness in essentially all other sectors, mainly in manufacturing and automotive. The consumer and business sentiments in Italy were low across 2024, in the context of weakness in the critical economies of the euro area too.

On the supply side, the broader GDP growth was only supported by the services sector in 2024, while essentially all other sectors witnessed a decline. With these impacts now behind us, what lies ahead for the broader Italian economy?

Inflation Is Expected to Remain Moderate, Says Deloitte  

In Italy, inflation slowed down in 2024 and remained the lowest for well-established European economies, added Deloitte. That being said, electricity and gas prices were higher in Italy in comparison to other large European economies including France and Germany, influencing the competitiveness of Italian companies. In 2025, Deloitte sees inflation to remain below the levels expected in the euro area and the ECB target of 2%.

Therefore, moderate inflation, along with nominal wage growth, can result in a gradual recovery in real wages. In general, the broader Italian labor market witnessed a contraction last year. Notably, while the number of employed people continues to increase, hours worked have witnessed a decline, primarily in the industrial sector. Deloitte believes that the broader Italian economy will maintain moderate positive growth in 2025, mainly in line with the anticipated average for euro-area economies. While it can face slightly higher consumer inflation, the levels will be lower than the euro area average. BNP Paribas believes that Italy still has the second lowest inflation in the Eurozone after Ireland. However, as elsewhere, inflation increased in January because of less energy deflation.

READ ALSO: 7 Best Stocks to Buy For Long-Term and 8 Cheap Jim Cramer Stocks to Invest In.

GDP Expansion on the Cards, Says Allianz Trade

As per Allianz Trade, Italy witnessed a strong recovery from the pandemic and was one of the best performers among the 4 major Eurozone economies. Even though GDP is now 5.6% above pre-pandemic levels, the broader economic activity witnessed a slowdown in recent quarters. It even stagnated (in real quarterly terms) in Q3 2024. However, private consumption growth resumed in 2024, with confidence recovering alongside the strong decline of inflation.

Moving forward, Allianz Trade sees private consumption picking up due to a recovery in income and an easing of monetary policy. Notably, a catch-up in NGEU spending is expected to make up for the partial recovery of investment activity. In 2025, the firm anticipates GDP to expand by 0.8%, followed by 1% in the following year.

Our Methodology

To list the 12 Best Italian Stocks to Buy in 2025, we used a screener and sifted through several online rankings. Next, we chose the companies having headquarters in Italy and in which analysts saw upside potential. Finally, the stocks were arranged in ascending order of their average upside potential, as of February 10. We also mentioned hedge fund sentiments from Insider Monkey’s database of 900 elite hedge funds, as of Q3 2024.

At Insider Monkey we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).

Ermenegildo Zegna N.V. (NYSE:ZGN)

Number of Hedge Fund Holders: 13

Average Upside Potential: ~15.4%

Founded in 1910 in Trivero, Italy, Ermenegildo Zegna N.V. (NYSE:ZGN) is a global luxury company with a leading position in the high-end menswear business. BofA upped the company’s price target to $10.40 from $8.90, keeping a “Buy” after the company reported Q4 organic revenue growth of 3% after 3 quarters of decline. Notably, the analyst believes that trends throughout all brands and regions saw an improvement sequentially and surpassed expectations. Also, the analyst says there is a greater visibility to revenue reacceleration for Ermenegildo Zegna N.V. (NYSE:ZGN).

In FY 2024, the Zegna segment’s revenues, including the ZEGNA brand, Textile, and Other, came in at €1,348.8 million compared to €1,322.0 million in FY 2023. The revenues in Q4 stood at €404.4 million, reflecting a growth of 5.0% YoY, driven by strong performance from the ZEGNA brand which more than offset the slowdown in the Textile division. The company anticipates 2025 to play out differently throughout various geographies.

While it has seen strong performance in the Americas and EMEA in the initial weeks of January, Ermenegildo Zegna N.V. (NYSE:ZGN) expects volatility in consumer demand in China. That being said, it remains prepared to navigate such challenges as a result of its focus on priorities. These priorities include building on the brand equity, focusing investments on key strategic projects, and doubling down on the existing strengths.

Overall, ZGN ranks 6th on our list of best Italian stocks to buy in 2025. While we acknowledge the potential of ZGN as an investment, our conviction lies in the belief that some deeply undervalued AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for a deeply undervalued AI stock that is more promising than ZGN  but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

READ NEXT: 20 Best AI Stocks To Buy Now and Complete List of 59 AI Companies Under $2 Billion in Market Cap

Disclosure: None. This article is originally published at Insider Monkey.