Lowered estimates, due mainly to discouraging consumer trends in China, prompted a re-evaluation of the company’s value.
Luxury-goods stock LVMH Moët Hennessy (LVMUY -3.61%) wasn’t looking too exclusive on Hump Day. The company’s share price had eroded by nearly 4% at market close, due in no small part to an analyst’s rather assertive price-target cut. That tumble was significantly steeper than that of the S&P 500 index, which ended the day down 0.2%.
Time for a price-target chop
That analyst was Morgan Stanley‘s Edouard Aubin, who reduced his price target on LVMH’s Europe-listed shares to 715 euros ($790) apiece from his previous estimation of 760 euros ($840). That’s quite a change. Nevertheless, Aubin maintained his equal-weight (i.e., hold) recommendation on the high-end consumer goods’ stock.
The pundit’s adjustment was due to modifications in his revenue and earnings before interest and taxes (EBIT) for both full-year 2024 and 2025. He now feels that LVMH’s top line will decline by 2% this year, compared to last, and by 3% in 2025. Those estimates for EBIT are a respective 3% and 4%.
Much of this is due to weakness in the fashion and leather goods segment. In his new research note on LVMH, Aubin wrote:
[W]e believe trends have further deteriorated in the Chinese cluster while the Americans and Europeans have only slightly sequentially improved. Anecdotally the latest tax-free spend data showed a deceleration on a year-over-year and five-year basis globally in July.
Not in a luxurious mood
According to Aubin, the Chinese market has recently been the driver of growth for those products. However, economic growth generally is slowing down in the massive Asian country. In environments like that, consumers tend to rein in their spending on expensive luxury items.
Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
