LVMH (Louis Vuitton Moët Hennessy) shares surged by 8% in European trading on Thursday after Bank of America (BofA) raised its rating on the luxury giant’s stock to “Buy” from “Neutral.” The upgrade included the addition of LVMH to BofA’s Europe 1 list of top investment ideas. BofA also raised its price target on LVMH shares to €735 (US$150), up from €700 (US$156), reflecting an upside potential of 13% in euros and 15% in U.S. dollars.
This upward revision comes after a difficult year for the luxury sector, which saw LVMH facing one of its toughest periods in the past decade. Despite these challenges, BofA analysts note improvements in trends since the third quarter of 2024, with controlled cost growth expected by 2025. A favorable shift in foreign exchange (FX) rates, transitioning from a headwind to a tailwind, is expected to bolster the company’s financial performance.
The analysts also pointed out that LVMH’s earnings per share (EPS) downgrade cycle has paused, marking a positive sign for the company’s future prospects. As the stock is trading at 23 times its projected 2025 price-to-earnings (P/E) ratio, analysts believe it is at a mid-cycle valuation. Should revenues reaccelerate, analysts expect a P/E re-rating toward the top end of the historical valuation range.
BofA emphasized that LVMH’s Fashion & Leather (F&L) revenue, which experienced a 5% decline in Q3 2024, shows signs of recovery. Moderate growth is expected in Q4 2024 and 2025, driven by a potential resurgence in American luxury demand and possible stimulus in China.
CWEB’s Analysis: CWEB’s analysis aligns with BofA’s positive outlook on LVMH. The luxury conglomerate’s strong brand portfolio, coupled with favorable market trends and international demand for high-end products, positions it for significant growth in 2025. With a solid financial foundation, LVMH remains well-positioned to capitalize on a rebound in luxury spending, particularly from American and Chinese markets.
Given the stock’s potential for continued upside, CWEB shares BofA’s optimism, making LVMH an attractive option for investors seeking exposure to the luxury goods sector.
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