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Investing.com - L’Oreal SA (EPA:OR) (OTC:LRLCY), a personal care products leader with impressive gross profit margins of 74.2%, received a rating upgrade from JPMorgan, which raised the cosmetics giant from Underweight to Neutral while significantly increasing its price target to EUR360.00 from EUR290.00. According to InvestingPro analysis, the company maintains a "GREAT" financial health score.
The upgrade follows what JPMorgan described as a "mixed" second quarter of 2025, after which L’Oreal management expressed confidence that the global beauty market should grow 4% in fiscal year 2025, implying approximately 5% growth in the second half of the year. The company has demonstrated consistent shareholder returns, maintaining dividend payments for 34 consecutive years with a 19.7% dividend growth in the last twelve months.
JPMorgan cited an improving setup in the United States market as a key driver for the upgrade, noting that L’Oreal’s CEO expressed optimism about sequential acceleration in the US and potential benefits from tariffs-related pricing, though it remains unclear if the first half saw some pull-forward in demand.
The firm raised its second-half 2025 like-for-like growth forecast for L’Oreal to 4.7% from 4.0% previously, while maintaining its medium-term forecast of 4-5% like-for-like growth.
Despite the upgrade, JPMorgan noted that L’Oreal’s valuation remains ahead of peers at 29x PE26e and 18x EV/EBITDA26e (both excluding Sanofi (NASDAQ:SNY)), representing a premium that "remains elevated in the face of a MT growth rate of JPME 4-5%." Current metrics from InvestingPro show a P/E ratio of 32.7x and EV/EBITDA of 20.5x, with 10+ additional valuation insights available to Pro subscribers.
In other recent news, L’Oreal has announced plans to acquire a majority stake in the British skincare brand Medik8. This acquisition aligns with L’Oreal’s strategy to bolster its Luxe portfolio, with the company highlighting Medik8’s global potential due to its proven efficacy and accessible pricing. In addition to this strategic move, RBC Capital Markets has identified L’Oreal as one of its top picks in the Consumer Staples sector, alongside other notable companies such as AB InBev. However, Barclays (LON:BARC) has downgraded L’Oreal’s stock rating from Overweight to Underweight, citing concerns over the company’s growth trajectory. Barclays noted that L’Oreal’s beauty market outperformance has declined to 1.1 times, which is below its long-term averages. Despite these concerns, the company’s recent acquisition efforts and recognition by RBC Capital suggest a nuanced outlook for investors. These developments highlight the dynamic environment in which L’Oreal is operating.
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