Zegna has an impressive growth story within the luxury sector, and recent underperformance in the stock offers an attractive opportunity for investors, according to Bank of America. The firm upgraded the menswear designer's shares to buy from neutral Monday and increased its price target to $16.50, implying more than 20% upside from its Friday closing price. "We see one of the fastest earnings growth profiles and profitability improvement for Zegna in our Italian coverage," Bank of America analyst Ashley Wallace said in a note. "On our numbers Zegna trades at 23x P/E 2024E which for a 17% EPS [compound annual growth rate] screens cheap." Bank of America estimates sales densities may already be at a 35% improvement from 2021 and more than halfway toward the company's mid-term guidance, Wallace said. Additionally, Zegna's segment profitability is now at 15% EBIT margin, which implies that and further movement will provide upside from its midterm guidance levels, she added. Wallace also mentioned Zegna's strong brand positioning with high-end customers, which can help the company implement more price increases in the mid- to high-single digits for the next two collections. The analyst also cited portfolio diversification from its acquisition this year of Tom Ford, which Bank of America sees as a way to help the company "gain scale and share, both horizontally and vertically." "We continue to see the secular growth in high-end menswear and we like the solid execution around the brand turnaround at Zegna which was crucial for us to understand to turn more positive," Wallace wrote. "Category transition into leisurewear is proving to be successful as the company sees traffic, conversion and average purchase value all contributing to growth." — CNBC's Michael Bloom contributed reporting.