LVMH in the Pivotal Point Check: Fresh Wind From China And a Positive Analyst Study by RBC boost The Shares of The Luxury Goods Group!
- The boom in demand from the period shortly after the coronavirus pandemic is over - the luxury goods business has returned to normal.
- In the first half of 2024, sales fell by 1% to 41.7 billion euros.
- In the longer term, however, LVMH will benefit from rising global incomes, which will lead to growing demand for luxury goods.
Hopes of an upturn in demand in China following the economic stimulus there also boosted LVMH shares on September 26, 2024. In 2023, strong demand for fashion, jewelry and perfume had given the luxury goods manufacturer the best year in its history. Despite a challenging economic period, wealthy people stocked up on handbags from Louis Vuitton, fragrances from Christian Dior and jewelry from Tiffany. LVMH increased its revenue by 9% compared to 2022 to more than 86 billion euros.
However, the boom in demand from the period shortly after the coronavirus pandemic is over and the luxury share price headed south. Business has normalized. While currency-adjusted revenue still rose by 17% in the First half of 2023, the increase thereafter was just under 10%. In the First Quarter of 2024, revenue rose by just 3% on a currency-adjusted and like-for-like basis to € 20.7 billion. In nominal terms, revenue even fell by 2% compared to the previous year. LVMH continued to struggle with subdued demand for its products in the second quarter. Excluding currency effects and acquisitions and disposals of business units, revenue grew by 1%. On average, analysts had expected almost three times as much growth. In the first half of the year, sales fell by a total of 1% to 41.7 billion euros. The operating result adjusted for special effects shrank significantly by 8% to 10.65 billion euros.
Despite, or perhaps because of, the economic and political uncertainties in the world, people may be buying more luxury goods again. The travel boom is also driving business at airports. The Canadian bank RBC has lowered its target price for LVMH from 800 to 760 euros ahead of the third quarter figures. However, the "Outperform" rating was confirmed on 26.09.2024. According to the analyst, subdued demand in most major markets reflects market expectations in the luxury goods sector. As existing challenges such as higher prices have not yet been resolved, the expert expects only low organic growth with stagnating margins. However, LVMH remains on the list of preferred sector stocks.
LVMH has a market capitalization of 345.26 billion euros. Revenue is expected to reach 87.42 billion euros in 2024. An increase to 110.04 billion euros is expected by 2027. Earnings per share are expected to amount to EUR 29.20 in the 2024 financial year and rise to EUR 40.10 by 2027. With this business development, the P/E ratio 2027e would be 17.2. There is no need to chase after the strong share price recovery of the last few days. If you want to add the shares of the luxury goods company to your portfolio, wait for weaker days. In the longer term, LVMH will benefit from rising global incomes, which will lead to growing demand for luxury goods.
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