(BFM Bourse) – With the downturn that the sector has experienced since August, the luxury number has lost nearly 18% in two months, and now underperforms the CAC 40 overall. of the year. But several analysts are confident for the future.
The champion of luxury and the Parisian coast has lost its luster. LVMH, like its entire sector, is experiencing a difficult time on the stock market.
Beyond the highly publicized loss of its status as the largest European market capitalization, from which the Danish Novo Nordisk now benefits, LVMH shares have lost nearly 18% since July 14 and even 19% compared to their peak of 904 .6 euros reached during the year.
However, this is not the most dizzying fall in luxury. The Swiss Richemont, owner of Cartier, plunged 24% compared to its closing price on July 14, following a publication on its sales that was very (too much even according to analysts) poorly received.
From now on, the LVMH share has shown a performance since January 1st lower than that of the CAC 40, gaining 7.7% compared to 11% for the Parisian index while luxury was the main driver of the progress of the Paris Stock Exchange on the first part of the year.
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Slowdown in the United States and concerns in China
The causes of this decline are known. The group saw its revenues decline in the United States (it is not the only one) in the second quarter (-1%) and also posted an operating margin in the first half lower than expectations, even if the latter hitch was explained by the group’s desire to invest to improve the desirability of brands, for example with Pharrell Williams’ spectacular show on the Pont-Neuf in Paris in June.
Overlaid on these half-year results, poorly received by the market, are fears for the entire sector regarding China, where economic indicators have deteriorated in recent months, despite good retail sales for the month of September.
“For a month, the pressure on luxury stocks on the stock market has come from China and the disappointment in the economic situation in the country. Because activity is slowing down in the United States and European consumers find themselves under continued pressure from inflation. So if China continues to disappoint it becomes complicated for the sector,” Jie Zhang, an analyst at the independent research firm AlphaValue, explained last week.
The fact remains that any fall in the stock market can become an opportunity and constitute a potential entry point for patient investors. On social networks and stock exchange forums, Internet users are wondering about the emergence of support for LVMH shares.
Rather optimistic analysts
For their part, not many analysts downgraded their opinion on the stock. Barclays recently moved from ‘overweight’ to ‘inline value weight’, which is the same as going from ‘buy’ to ‘neutral’.
Barclays does not have any major grievances against the number one in luxury, deeming it more robust in the event of a deterioration in the economy than other groups in the sector. But the British bank fears that expectations are too high for this good student and prefers stocks with more attractive valuations (Prada, Richemont) or with even better dynamics (Moncler).
“The group disappointed in its margins in the second half of 2022 and the first half of 2023 and we see risks for the second half of 2023. Indeed, although management has indicated that the fashion & leather goods division should be able to defend its margins, we note that this comment was made during the first half results and that the deterioration of the macroeconomic environment could jeopardize the division’s ability to maintain its margins”, underlines Barclays.
“LVMH is a high-quality name but that sometimes comes with high expectations,” explains the establishment. “While we understand that the valuation level could be considered an attractive entry point, we also see less reason to push the stock at this stage,” concludes Barclays.
Quoted by Cercle Finance, Jefferies this week also went from “buy” to “hold”. The bank believes that the stock remains attractive in the long term. But over the next twelve to eighteen months, she considers that the action of the luxury number will not break free from the general trend that is not very attractive in its sector.
But other research offices have recently confirmed their confidence in the action of the number one luxury brand. This is the case for HSBC, which remains a long-term buyer of the group (as well as Moncler, Richemont and Prada).
For the Sino-British bank, the number one luxury company has “a lot to reassure long-term investors”. She points out that two of the group’s flagship brands, Louis Vuitton and Dior, are currently making investments to support their attractiveness. With promising prospects. “At Louis Vuitton, Pietro Beccari, the new president and CEO of the brand, a defector from Dior, began to implement ambitious and daring projects in order to move the brand to the next gear”, a brand which “could achieve a turnover of 30 billion euros over the next four or five years”, underlines HSBC.
At the start of the year, Bernard Arnault, CEO of LVMH, made a small departure from the rule that the group does not communicate its revenues by brand by revealing that Louis Vuitton had exceeded 20 billion euros in revenues. in 2022.
“Overall (…) we believe that LVMH increasingly stands out from its peers by developing partnerships, real estate opportunities and a brand desirability that will be difficult to match,” considers HSBC.
Royal Bank of Canada reiterated its advice to “outperform” (purchase equivalent) with a price target of 890 euros, which leaves a potential appreciation of more than 20%. “We consider that the flexibility (of the group, editor’s note) in terms of costs is attractive and that it is better placed to protect its margins,” underlines the Canadian bank.
More broadly, according to investing.com, 23 of the 27 research firms that track the stock recommend buying the stock. Their average price target of 911.35 euros gives a theoretical potential of almost 25%.
Julien Marion – ©2023 BFM Bourse
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