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Investing.com -- Shares of Puig Brands fell more than 5% on Thursday after J.P. Morgan downgraded the Spanish beauty company to “underweight” from “overweight,” citing growing risks from a global slowdown in the fragrance market and a weaker earnings outlook.
The brokerage cut its price target for Puig to €12.50 from €25, saying the company faces earnings pressure as the post-pandemic fragrance “super cycle” fades and market growth normalizes.
In a note dated Thursday, J.P. Morgan said Puig remains the most vulnerable among European beauty companies because of its heavy reliance on fragrances, which account for about 72% of its revenue and 86% of EBIT for fiscal 2025.
The brokerage reduced its fiscal 2026 adjusted earnings per share forecast by 12%, citing a slower top-line performance led by fragrances, as well as the effects of operating deleverage and tariffs.
J.P. Morgan now expects Puig’s like-for-like sales growth to slow to 1.4% in 2026 from 5.7% in 2025, with adjusted EBIT margin seen falling to 14.6% from 15.4%.
The analysts said Puig’s fragrance growth, which reached 8.6% in the first half of 2025, is expected to slow to 1.7% in the second half and turn slightly negative at 0.5% next year.
J.P. Morgan analysts said consumer fatigue, increased competition, and tariff-related price impacts could weigh on results, particularly in Western Europe, where demand has weakened.
Although Puig has expanded into makeup and skincare through brands such as Charlotte Tilbury, J.P. Morgan said those divisions are unlikely to offset the downturn in fragrances in the near term.
“While the company should outgrow the Beauty market longer term - as evidenced by historical share gains in Fragrances and with white spaces in Skin care and Make up - we expect the market to challenge its current growth ambitions amidst a slowing fragrance market and growing competition from disruptive brands in make up,” the analysts said.
Puig’s shares, which have already de-rated this year, were trading at about €14.29 before the downgrade, according to J.P. Morga data.
The new target of €12.50 values the stock at 13 times projected 2026 earnings, a 10% discount to European household and personal care peers.
JPMorgan estimates that global fragrance demand will slow to 1–2% in fiscal 2026, leading to the downgrade.
The brokerage said normalization after several years of double-digit gains could leave the sector facing below-average growth for two to three years.