Possible new highs for LVMH on the horizon?
Luxury titan LVMH emerges victorious, teetering on a new peak of 806 euros
Embrace opulence with LVMH, the French luxury empire that's put Bernard Arnault at the top of the wealth charts. This powerhouse boasts a prestigious lineup of brands such as Louis Vuitton, Christian Dior, and Moet & Co., turning investors' investments into staggering 1000% returns since the turn of the millennium.
Why does this seem like a golden combination? Well, the proof lies in the pudding—or rather, the soaring share price.
Luxury's timeless charm
Despite the tumultuous challenges in 2022, the company reached a milestone, touching an all-time high of 805 euros. The notion of "luxury is eternal" rings true on Wall Street, thanks to LVMH's robust performance and consistent cash flow. This means the really affluent and sophisticated don't sweat over the difference between a 3000 or 4000 euro handbag, giving LVMH the leverage to play pricing games—especially in times of inflation.
Robust performance
During Thursday's shareholders meeting, the company's impressive Q3 2022 figures also echoed this sentiment. Not only did they retain sales and profits, but they even escalated these key figures by a commendable 23% compared to the preceding year's quarter. Organic sales growth even outpaced inflation at 9%. Their 2023 outlook was cautiously optimistic, with CEO Bernard Arnault expressing cautious enthusiasm for the coming year.
Should you invest in LVMH?
This financial dynamo's unstoppable momentum makes investors take a second look. As a market leader, LVMH appears less susceptible to the economic cycle than many competitors. While the company's P/E ratio (18-20, depending on estimates) might seem steep, luxury and quality do command a price. Compared to competitors like Hermes, the LVMH share seems an affordable bargain.
By the way, LVMH graces the BÖRSE ONLINE Aktien für die Ewigkeit Index alongside other big players such as Berkshire Hathaway, Microsoft, and Allianz.
Important Disclosure:The author holds direct stakes in the financial instruments mentioned herein or derivatives based on them, potentially profiting from the market developments arising from this report.
Important Disclosure:The price of the financial instruments is derived from an index, with Boersenmedien AG owning the rights to the index. Boersenmedien AG has entered into a cooperation agreement with the issuer of the displayed securities, granting the issuer a license to use the index. In return, Boersenmedien AG receives remuneration from the issuer.
New Analysis Insights:Although Q3 2022 results aren't explicitly covered in this article, recent analyses have shed light on the factors shaping LVMH's trajectory:
- Post-Pandemic Normalization: After astronomical revenue growth (24.5% annually) and EPS soars (47.8% annually) from 2020–2023, LVMH now grapples with pressure to maintain the momentum amid reduced luxury spending and soft demand.
- Geopolitical and Macroeconomic Pressures:
- China’s Economic Slowdown: Curtailed consumer spending in a crucial market affects the luxury sector.
- Tariff Risks: Intensifying trade policies threaten to disrupt pricing strategies and margins.
- Operational Resilience: Despite projected revenue decreases in some segments in 2024, LVMH's profitability remains strong compared to peers like Kering (which saw a 50% income drop in 2024). Strategic acquisitions, such as investments in leather suppliers Heng Long Italy and Robans, augment vertical integration and ensure supply chain stability.
- Valuation and Investor Sentiment: Analysts stress LVMH’s long-term compounding potential due to its brand portfolio, disciplined capital allocation, and wide moats. However, recent earnings volatility (e.g., a 13.8% EPS miss in June 2024) demonstrates increased sensitivity to short-term challenges.
As the company maneuvers through these landscapes, its ability to navigate cyclical downturns while investing in high-margin segments remains pivotal for its future outlook.
- The timeless charm of luxury, embodied by LVMH, defied the market turbulence in 2022, soaring to an all-time high of 805 euros, a testament to the company's enduring cash flow and robust performance.
- During a shareholders meeting in October 2022, LVMH unveiled their Q3 figures, demonstrating a remarkable 23% increase in sales and profits compared to the previous year's quarter.
- The stellar performance of luxury titan LVMH has piqued the interest of investors, with its share price seemingly less vulnerable to economic cycles than many competitors, making it an appealing option for investing in the fashion-and-beauty lifestyle industry.
- In light of recent analyses, LVMH's future growth is shaped by factors such as post-pandemic normalization, geopolitical and macroeconomic pressures, operational resilience, valuation, and investor sentiment.
- Despite challenges, LVMH's profitability remains strong in comparison to competitors like Kering, and their long-term compounding potential is emphasized due to a disciplined capital allocation and wide moats provided by their brand portfolio.
