L’Oreal, Repsol are among latest additions to Goldman’s ’European Conviction List

Investing.com -- Goldman Sachs analysts have recently updated their European Conviction List, adding L’Oréal (EPA:OREP) and Repsol (OTC:REPYY), among others. 

The European Conviction List is a selection of fundamental buy-rated European stocks that Goldman Sachs analysts believe are their most differentiated ideas.  

Goldman Sachs analysts have included L’Oréal in the Conviction List due to the company’s strong position in the resilient beauty market. 

Beauty is considered one of the most resilient end-markets within consumer staples, and L’Oréal is expected to outperform the industry. 

This outperformance is attributed to the ongoing strength in fragrance sales and double-digit growth in emerging markets, including India.  

Analysts at Goldman Sachs also see potential upside for L’Oreal from a recovery in China and new product innovation. 

The China Consumer team at Goldman Sachs has observed that the second derivative continues to improve, with combined Jan/Feb cosmetics growth showing positive trends. 

Additionally, L’Oréal’s management has highlighted innovation as a key growth driver in FY25, suggesting further upside risk to growth forecasts.  

While Goldman Sachs analysts acknowledge the absence of short-term catalysts for L’Oreal and expect a potentially weak Q1, they believe this is already reflected in the company’s valuation. 

The stock is currently trading at approximately 26 times the 12-month forward P/E, which is at a discount compared to its 5-year and 10-year averages. 

Goldman Sachs analysts believe that investors are currently overlooking L’Oréal’s attractive fundamentals and balance sheet optionality.  

Goldman Sachs analysts, particularly Michele Della Vigna, expect Repsol to benefit from a supportive medium-term outlook for US gas prices.

US gas production accounts for a major portion (26%) of Repsol’s total production.  

On a micro level, Goldman Sachs analysts believe that investors underappreciated the extent to which Repsol has reshaped itself into a lower-cost and higher-return company. 

Repsol is viewed as one of the best companies in terms of operating cash flow uplifts within Goldman Sachs’ coverage.  

Further portfolio optimization and disposals are expected to help crystallize value and potentially lead to attractive shareholder returns. 

Goldman Sachs flags that Repsol offers one of the highest shareholder returns within their EU Big Oils coverage. 

The company’s strategy includes a mix of dividends and buybacks, indicating a focus on returning value to shareholders.