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On Tuesday, Morgan Stanley (NYSE:MS) downgraded LVMH (EPA:LVMH) (MC:FP) (OTC: LVMUY) stock from Overweight to Equalweight and reduced its price target from €740.00 to €590.00. The downgrade comes following a weaker-than-expected start to the year for LVMH, which may be indicative of a broader slowdown in the luxury goods sector. According to InvestingPro data, LVMH’s stock is currently trading near its 52-week low of $106.48, suggesting potential value for long-term investors. The company maintains a "GOOD" overall financial health score, with particularly strong profitability metrics.
LVMH’s Group Organic Sales Growth (OSG) declined by 3% year-over-year, contrary to the 0.6% increase anticipated by the VA Consensus. All five of LVMH’s divisions experienced sales below market expectations, with the crucial Fashion & Leather Goods division witnessing a significant "double dip" in sales in the first quarter, posting a 5% decrease year-over-year versus the -0.7% predicted.
The report attributed the sequential decline from a 1% year-over-year drop in the fourth quarter of 2024 to a 5% drop in the first quarter of 2025 largely to a reduced demand from Chinese consumers, particularly affecting sales in Japan. Additionally, spending by U.S. nationals also showed a slight decrease in the first quarter. Management’s commentary on the second quarter’s start in the U.S. and other regions remained vague.
Morgan Stanley’s analysis suggests that the full-year 2025 may see a contraction in top-line sales similar to that of 2024, with an anticipated decline of 0.6%. However, the firm expects a less severe impact on operating margins, forecasting a 140 basis points contraction compared to the 280 basis points seen previously. The analysts also predict a continued decline in sales for the second quarter of 2025, estimating a 3% drop versus previous expectations of a 2% increase.
If Morgan Stanley’s projections hold true, this would mark the first time in over 30 years that LVMH’s Fashion & Leather Goods division has experienced four consecutive quarters of sales contraction. The current situation differs from past downturns in 2008, 2009, and 2020, as the demand from China, which had previously grown significantly, is now a key factor in the downturn amidst a softer global economic environment and after significant price increases in the industry.
In other recent news, LVMH Moet Hennessy Louis Vuitton SE (OTC:LVMUY) has been the focus of several analyst reports following its latest earnings announcements. TD Cowen raised its price target for LVMH to €840, maintaining a Buy rating, driven by robust fourth-quarter results and strong performances in the Watches & Jewelry and Fashion & Leather Goods segments. Conversely, Bernstein adjusted its price target downward to €625 while maintaining an Outperform rating, citing reduced growth expectations in several divisions and a forecasted margin contraction. Stifel downgraded LVMH from a Buy to a Hold rating despite raising the price target to €710, pointing to limited potential for further stock appreciation after a substantial rise. Meanwhile, JPMorgan reiterated a Neutral rating with a €650 target, noting that LVMH’s sequential improvement fell short of broader market expectations.
Citi continues to rate LVMH as a Buy with a €763 target, highlighting the company’s operational expense control despite a notable year-over-year decline in EBIT for the latter half of 2024. The firm expects revisions to LVMH’s 2025 sales and EBIT forecasts due to various operational challenges. Analysts have also noted the impact of external factors, such as foreign exchange headwinds and timing of events like the Chinese New Year, on LVMH’s performance metrics. Despite differing opinions on LVMH’s growth potential, the company remains a focal point in the luxury sector, with its stock trading at high valuation multiples.
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