burberry (LSE: BRBY) share price has been through hell lately but suddenly it’s flying. What’s going on?

Last month the luxury goods maker destroyed every stock in the world FTSE100It rose rapidly by 28.61%. Defeated almost all of his opponents FTSE250It’s also where he is now. Construction company only Morgan Sindall It outperformed with an increase of 29.54%.

So, are we looking at an oversold stock making a well-deserved comeback? Or is it good old fashioned dead cat splashing?

This FTSE 250 share has risen like a rocket!

Burberry collapsed in January after the board issued a profit warning and cut full-year profit forecasts following a nightmare Christmas trading period.

I learned that one profit warning often follows another, and that this warning came in May, when full-year profits fell 40% to £383m as sales fell in Asia and America. That’s when I had the opportunity to snap up Burberry shares at what I think is a bargain price. and earn an eye-popping return of over 6%.

I bought the stock twice in May and averaged out in July as the decline continued, only to find myself facing a 45% paper loss. I consoled myself with the returns until the board, along with the CEO, cut shareholder payouts.

At that point I stopped trying to catch the falling knife. Days later, recovery began.

Burberry achieved its first rise after Beijing announced its new incentive package. US soft landing hopes also supported the luxury goods market.

But the recovery hasn’t lifted all luxury stocks, the biggest, LVMHIt decreased by 7.59% compared to last month. Apparently investors decided Burberry had gone too far. Some may have pinned their hopes on takeover talk. Personally, I never buy shares for this reason.

Healing will take time

Burberry shares are still down 54.35% over the past year, suggesting there is still a price reduction opportunity here. They’re currently trading at a price-to-earnings ratio of 9.97, which seems like a good value, assuming we can trust the P/E after all that’s happened.

Interestingly, the 17 analysts who offered one-year price forecasts for the stock set an average target of 643.6 points. If true, a further 18.06% decline would be suggested from here. It can happen easily.

Burberry still needs to refine its brand positioning. Attempts to target ultra-high-net-worth consumers failed and suffered the damage that mass-market popularity could do to its image. Say Burberry and some instantly think their baseball caps are unfair or unfair.

Shares rose 6.34% on Friday on another wave of optimism. This reduced my personal loss to just 27.16%. I’m very pleased with the recovery, but I’m already exposed enough and I’m not going to pursue it.

If I didn’t have Burberry I would buy it today long term outlook. But he still thinks it faces a pile of challenges and expects more share price volatility before it finds its feet, which I think it eventually will.