Paramount stock rises after FCC approves Skydance merger
On Monday, RBC Capital Markets highlighted its top stock picks in the Global Consumer and Retail sector, emphasizing a mix of established giants and emerging players poised for growth. The firm’s analysts spotlighted Walmart (NYSE:WMT), Loblaw (TSX:L), and Zalando (ETR:ZAL) as leading choices in Retail; AB InBev (EBR:ABI) and L’Oreal (EPA:OR) in Consumer Staples; and adidas (ETR:ADS) and EssilorLuxottica (EPA:EL) in the Luxury/Sporting Goods categories. L’Oreal, with its impressive $230.77 billion market capitalization, has demonstrated strong momentum with a 25.04% year-to-date return.
The analysis by RBC Capital underscored a long-term shift towards digital and discount retailing, noting that despite a slight year-to-date fallback in Amazon (NASDAQ:AMZN)’s market cap due to decelerating growth at AWS and trade war concerns, there is potential for AWS to pick up speed in the second half of the year. Meanwhile, Walmart and Costco (NASDAQ:COST) have seen market cap improvements, benefitting from a trend towards value-based retailers.
The firm has downgraded Dunelm’s stock rating from Outperform to Sector Perform, suggesting B&M as a more attractive alternative due to its compelling valuation and expected return to like-for-like sales growth from Q1. In contrast, the Consumer Products sector is seen as driven by company-specific fundamentals, with AB InBev and L’Oreal standing out for their robust market positions and growth prospects.
In the Luxury and Sporting Goods sub-sector, adidas and EssilorLuxottica are identified as top picks. adidas is recognized for its market share gains and favorable valuation, while EssilorLuxottica is considered a defensive bet, anticipating continued core business strength and excitement around a new Ray-Ban Meta (NASDAQ:META) product launch later in 2025.
RBC Capital’s report also touched on the geographical shifts in market cap, with the US peaking last year and giving way to China and Europe. The analysts expect Walmart to continue being a strong pick in the US, while Loblaw is favored in Canada for its growth potential and valuation. In Europe, Zalando is praised for its underappreciated growth drivers and margin potential.
In other recent news, L’Oreal announced plans to acquire a majority stake in the British skincare brand Medik8. This acquisition is part of L’Oreal’s strategy to enhance its Luxe portfolio, with the deal expected to finalize in the coming months pending regulatory approvals. Inflexion, a private equity firm, will retain a minority stake, while Medik8’s founder and management will remain involved. Meanwhile, L’Oreal’s recent sales performance has surpassed expectations, driven by strong growth in China despite a slowdown in the US market. Analysts from Evercore ISI and Deutsche Bank (ETR:DBKGn) have noted the company’s better-than-expected sales, with Deutsche Bank adjusting its price target to €265. Additionally, Goldman Sachs maintained a Buy rating for L’Oreal with a price target of EUR430, citing robust first-quarter sales across all divisions. In contrast, Citi analysts held a Neutral rating with a EUR350 target, pointing to concerns about first-quarter organic sales growth and potential downside risks to margins. These developments highlight L’Oreal’s strategic moves and market performance amid varying global market conditions.
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