Is it time to pop the cork on an LVMH investment? World-renowned Louis Vuitton-Moët-Hennessy (LVMH), the luxury conglomerate, has experienced slower growth over the past year, leading to a 24% drop in stock price from its all-time high. While that doesn’t sound like a reason to celebrate with a glass of high-end bubbly, this presents a potential value opportunity. Its Fashion and Leather Goods segment dropped in growth from high single digits in prior quarters to 2% in Q1 of this year. Revenue for the company’s Wines and Spirits sagged by 12% in Q1. Selective Retailing increased by 11% in revenue growth, but it wasn’t enough to offset other declines. Despite these challenges, there are reasons to be upbeat about LVMH's long-term potential. Discounted earnings analysis suggests the stock is undervalued by about 22%.
Who Is LVMH?
Louis Vuitton-Moët-Hennessy (LVMH) is a luxury goods giant engaged in six sectors: Wines and Spirits, Fashion & Leather Goods, Perfumes & Cosmetics, Watches & Jewelry, and Selective Retailing. Its most famous brands include Moët & Chandon, Dom Pérignon, and Hennessy; Louis Vuitton, Givenchy, and Dior; Bulgari and Tiffany & Co.; and Princess Yachts. LVMH was founded when Moët Hennessy and Louis Vuitton merged in 1987.
The company’s slowdown is attributed to several factors. There has been weaker consumer confidence and spending in China, a key market for luxury brands. Inflation and interest rate hikes plus geopolitical tensions contributed to fewer high-priced purchases. The slowdown followed exceptionally high post-pandemic growth rates.
As part of its growth strategy, LVMH is targeting Gen Z consumers, who are expected to dominate luxury spending by 2025. Improved economic conditions could boost demand for luxury goods. The company plans to develop its brands through investment and continual innovation, focusing on quality, desirability, and selective distribution.
What The Analysts Are Saying
As a French company, LVMH is traded on the Euronext Paris Eurolist. However, investors who wish to gain exposure can invest in LVMH through a luxury sector ETF. These include iShares STOXX Europe 600 Personal & Household Goods (0MOJ), SPDR MSCI Europe Consumer Discr UCITS ETF (CDIS), and iShares MSCIEurope Consumer Discretionary Sector UCITS ETF AccumEUR (ESIC).
Analysts believe there is potential for 25% price growth in the next 12 months and an estimated 15% CAGR over a 10-year period. Risks include potential geopolitical disturbances that can disrupt supply chains and weaken luxury demand. However, Wall Street analysts still see LVMH as a Moderate Buy with an average price target that suggests around 25% upside potential.
Neither Julie Stoller nor Stocks.News have positions in this company.
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Contributing Writer
As a professional writer since 2012, Julie Stoller has covered many industries, from healthcare and technology to consumer products and industrials. She has written about IPOs, spinoffs, ETFs, stock splits, commodities, legislative actions impacting investors, and macroeconomic issues. While keeping up with the latest meme stocks and trends, Julie's special interests are discovering ...