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On Monday, Jefferies analyst James Grzinic increased the price target on LVMH (EPA:LVMH) Moet Hennessy Louis Vuitton SE (MC:FP) (OTC: OTC:LVMUY) shares to €670 from the previous €560, while keeping a Hold rating on the stock. With a current market capitalization of $394 billion and trading at $158.44, InvestingPro analysis indicates the stock is currently trading above its Fair Value. Grzinic anticipates that the company's fourth-quarter update, scheduled for January 28, will provide a clearer picture of the luxury market's direction than recent reports from competitors.
The update from LVMH is expected to be more indicative of luxury trends than the information provided by Compagnie Financière Richemont (SIX:CFR) SA and Burberry Group (OTC:BURBY) PLC. As a prominent player in the luxury goods industry with impressive gross profit margins of 68.5% and annual revenue of $91.7 billion, LVMH's performance carries significant weight. Richemont recently reported increased availability of best-selling items and benefits from cryptocurrency trends and consumer behavior, while Burberry (LON:BRBY)'s results were affected by a reversal of previous strategic decisions that had harmed the company's performance.
Grzinic's analysis suggests a forecast of a 3% increase for LVMH's fourth-quarter and second-half Fashion & Leather Goods margin, with a decrease of 270 basis points. The analyst pointed out that it remains uncertain whether the fourth-quarter results will signal the beginning of mid-term upgrades for the company, which may be necessary given valuations excluding COVID peaks.
The price target adjustment to €670 reflects a nuanced view of LVMH's position in the market, as investors look forward to the company's forthcoming quarterly financial disclosure. Grzinic's comments highlight the complexities of the luxury sector and the factors that may influence LVMH's performance relative to the broader industry trends.
In other recent news, LVMH has experienced a series of analyst revisions. BofA Securities upgraded LVMH's stock rating to buy and increased its target to EUR735, indicating a positive outlook for the company's growth and profitability. This upgrade was based on improving trends in luxury demand, controlled cost growth, and a shift from foreign exchange headwinds to tailwinds.
Simultaneously, Berenberg initiated coverage of LVMH with a buy rating, citing the company's robust business model and growth resilience. However, LVMH's third-quarter revenue fell short of expectations, marking a 5% miss and an 8% decline in profit from recurring operations, totaling €10.7 billion, as reported by RBC Capital.
Despite this, TD Cowen reaffirmed its buy rating on LVMH, emphasizing the stock's favorable price-to-earnings ratio and free cash flow yield. On the other hand, RBC Capital, Goldman Sachs, Citi, JPMorgan, and Morgan Stanley (NYSE:MS) have all adjusted their price targets for LVMH, with Goldman Sachs lowering its target following underperformance in the company's fashion and spirits divisions.
Despite a cautious outlook in the luxury sector and lowered earnings estimates by several firms, LVMH remains RBC Capital's preferred pick within the luxury sector. These are recent developments, indicating a cautious but still promising view of LVMH's investment appeal. The company continues to demonstrate strong fundamental performance with annual revenue of $91.69 billion and a consistent dividend payment track record of 27 consecutive years.
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