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On Wednesday, Bernstein SocGen Group adjusted its financial outlook for LVMH (EPA:LVMH) Moet Hennessy Louis Vuitton SE (MC:FP) (OTC: OTC:LVMUY), revising the price target downward from €800 to €625. The firm maintained its Outperform rating on the luxury goods company's stock despite the adjustment. According to InvestingPro data, LVMH shares have declined over 14% in the past week alone, with the stock currently trading near its 52-week low of $106.48.
The revision reflects a significant change in the expected organic growth rate for the company's Fashion & Leather Goods (F&LG) division for the fiscal year 2025, decreasing the forecast from a positive 4% to a negative 3.1%, representing a 710 basis points reduction. Bernstein analysts cited a projected sharp downturn in growth during the second quarter of 2025, as promotional activities at Louis Vuitton are expected to decline.
Additionally, the firm has lowered its organic growth estimates for other LVMH divisions, including Wines & Spirits (W&S), Perfumes & Cosmetics (P&C), Watches & Jewelry (W&J), and Selective Retailing (SR), by 500 to 900 basis points. This adjustment is based on the expectation that W&S and W&J will perform weaker than the group's average.
Group organic sales growth is now forecasted to contract by 2.5%, which is 640 basis points below the consensus. Bernstein's analysts also predict a year-over-year margin contraction of 90 basis points to 22.2% for the fiscal year 2025, as operational leverage decreases. This is in line with management's previous indication that at least 3% growth is necessary to maintain margins. Despite these challenges, InvestingPro data shows LVMH maintains impressive gross profit margins of 67.03% and operates with moderate debt levels. Get access to 12 more exclusive InvestingPro Tips and comprehensive financial metrics to make informed investment decisions.
The updated earnings per share (EPS) forecasts from Bernstein are now 11% and 14% below the consensus for fiscal years 2025 and 2026, respectively. The valuation of LVMH has been set using a target 1.75x relative price-to-earnings (P/E) multiple to the MSCI Europe, which translates to a 24x P/E multiple. This is slightly below the company's 10-year average of 25x. According to InvestingPro's Fair Value analysis, LVMH appears undervalued at current levels, with the stock trading at a P/E ratio of 19.92x. Despite the lowered growth and profit expectations, Bernstein continues to rate LVMH as Outperform with a price target of €625.00.
In other recent news, LVMH Moet Hennessy Louis Vuitton SE reported notable developments impacting its financial outlook and investor sentiment. TD Cowen analysts increased their price target for LVMH to €840, maintaining a Buy rating due to the company's robust fourth-quarter performance, particularly in the U.S. market. This adjustment reflects confidence in the luxury sector's trajectory, with LVMH's growth in Watches & Jewelry and Fashion & Leather Goods segments being highlighted as key drivers.
Conversely, Stifel analysts downgraded LVMH from a Buy to a Hold rating, despite raising the price target to €710. The downgrade was attributed to limited potential for stock price growth and a lack of earnings upgrades, alongside high operating expenses in the Watches & Jewelry segment. Meanwhile, JPMorgan maintained a Neutral rating with a €650 target, noting that LVMH's recent quarterly report showed improvement but did not meet high market expectations.
Citi analysts retained a Buy rating with a €763 target, acknowledging LVMH's modest sales beat in the fourth quarter but cautioning about challenges such as foreign exchange headwinds and operational expenditure issues. Despite these hurdles, Citi expects a low single-digit increase in operational expenses for 2025. These recent developments provide investors with varying perspectives on LVMH's current standing and future potential within the luxury market.
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