On Wednesday, Goldman Sachs adjusted its price target for LVMH Moet Hennessy Louis Vuitton SE (MC:FP), the luxury goods conglomerate, lowering it to EUR770.00 from the previous EUR815.00. Despite this change, the firm maintained its Buy rating on the stock.
This revision came after LVMH’s third-quarter sales report revealed a 3% decline in constant foreign exchange (cFX) growth, not meeting market expectations. The company’s organic sales also dropped by 3% year-over-year in cFX during the third quarter, underperforming against the Visible Alpha Consensus Data, which had predicted a 1% increase, and Goldman Sachs’ projection of a flat performance. The Fashion and Leather division, LVMH’s largest, saw a 5% decrease in cFX, falling short of the anticipated 1% growth and Goldman Sachs’ forecast of no change.
LVMH’s Wines & Spirits division also reported a 7% slump in cFX, exceeding the consensus estimate of a 2% decline and Goldman Sachs’ estimate of a 5% reduction. This downturn was attributed to weak demand, although the Hennessy brand grew in the United States as inventory levels among wholesale partners began to normalize.
The Watches and Jewellery division experienced a 4% decline in cFX growth, slightly below the consensus estimate of a 3% decrease, yet consistent with the division’s previous quarter performance. The overall underperformance was largely due to negative volumes, although the price mix remained relatively stable.
In other recent developments, LVMH reported mixed financial results amid a challenging global market. The luxury goods company achieved a modest revenue increase for the first half of 2024, with organic growth of 2%, reaching €41.7 billion. However, there was an 8% decline in profit from recurring operations compared to the previous year, totaling €10.7 billion. Despite the third-quarter revenue shortfalls, RBC Capital maintained its Outperform rating for LVMH.
Similarly, Citi, JPMorgan, and Morgan Stanley have all lowered their price targets for LVMH, expressing concerns about weakening demand in Asia and Europe across most divisions. These developments highlight the challenges and adjustments LVMH is encountering in response to shifting market dynamics.
Despite these challenges, InvestingPro data indicates robust aspects of LVMH’s financial health. The company maintains a gross profit margin of 68.53% over the last twelve months as of Q2 2024, demonstrating its ability to retain profitability in a difficult market. Furthermore, LVMH has consistently increased its dividend for four consecutive years and has upheld dividend payments for 27 consecutive years, displaying a dividend yield of 2.04% and a 25.08% dividend growth over the past year.
While the recent sales report prompted a price target reduction, LVMH is trading near its 52-week low, potentially offering a value opportunity for long-term investors. A P/E ratio of 22.35 reflects market confidence in LVMH’s earnings potential, despite recent headwinds. InvestingPro offers additional insights into LVMH’s financial health and market standing for investors seeking a more comprehensive analysis.
