Are LVMH shares cheap? Analysts eye rebound after Louis Vuitton owner's recent price slump

Daily Mail​

15-07-2025

LVMH shareholders have endured a torrid 2025 so far, with the French luxury group's stock market value sinking by a quarter over the last six months.
The group, which counts Louis Vuitton, Dior and Givenchy among its stable of fashion brands, has seen shares sink by almost a third over the last 12 months as the global luxury rebound has probed sluggish.
Last week Louis Vuitton announced it was targeted by a cyberattack for the third time in the past three months at the beginning of July, after Marks & Spencer, the Co-op and Harrods were all targeted earlier this year.
Meanwhile, LVMH's drinks division, Moët Hennessy, is being gripped by a €1.3million court case brought by Maria Gasparovic, former chief of staff to executive Jean-Marc Lacave, who was sacked four months after reporting alleged sexual misconduct by senior colleagues.
Despite these recent tribulations for the firm, analysts think shares could be due a rebound.
LVMH revenues contracted 3 per cent to €20.3billion in the first quarter, from €20.7billion a year ago, well below analyst forecasts for sales growth of 2 per cent.
Revenue in the firm's wines and spirits division, headed up by its Moët and Hennessy brands, declined 9 per cent to €1.3billion.
Its largest category, fashion and leather goods, saw sales fall 5 per cent to €10.1billion, from €10.5billion previously.
The firm, which was the first in its sector to post figures after the Donald Trump's 'liberation day' tariff announcements, said: 'In a disrupted geopolitical and economic environment, LVMH remains both vigilant and confident at the start of the year.'
The French firm, which has a market capitalisation of almost €250billion, owns 75 luxury brands.
It will publish its results for the first half of its 2025 financial year on 24 July.
A luxury slump
It isn't just LVMH that is feeling the pinch, the entire luxury sector is facing a similar downturn.
After a post-pandemic peak that saw luxury brands surge on the back of huge demand, external pressures such as geopolitical uncertainty and economic slowdown have precipitated a downturn across the sector.
During the course of 2024, the market dipped from €369billion to €364billion, according to figures from Bain & Company, with weaker demand, especially from China and the US, pushing the shrink.
American luxury demand was down around 10 per cent in 2024 compared to its peak in 2022, according to data from Morningstar, while Chinese demand has slipped a quarter in compared with its pre-pandemic high point.
Even so, LVMH has suffered a worse fate than many, with the firm underperforming luxury peers.
Morningstar analysts said LVMH is currently trading below the broker's value estimate of €620 per share.
At midday on Thursday, LVMH shares were trading at €496.05 per share.
Why is LVMH undervalued?
Since January, LVMH shares have fallen some 34 per cent, and was surpassed in value by Hermes, which became the largest luxury goods firm in April.
Morningstar says this is a normalisation after the post pandemic boom, during which the firm said LVMH's valuation was stretched.
At the time, LVMH was operating on a price to earnings ratio of 26. Now, having seen its share price half, its PE ratio on a one year rolling basis now stands at 20.2, according to figures form Stockopedia.
In comparison, the new king of luxury, Hermes, is operating on a PE ratio of 50.8. Likewise, a number of other luxury goods firms have significantly larger PE ratios than LVMH, with Burberry standing at 48.2, EssilorLuxotica at 33.1 and Kering at 26.7.
Jelena Sokolova, senior equity analyst at Morningstar, said: 'We have seen luxury sector slowdowns many times before, but this time LVMH's valuation has been unfairly hit.
'The retailer is trading at its lowest forward earnings multiple in seven years and roughly half that of comparable wide-moat peers, which presents an opportunity for investors.'
Morningstar added: 'Forward earnings multiples are at the lowest for the last seven years and are meaningfully below peers, offering around 30 per cent upside to our fair value estimate.'
However, others argue that LVMH's downturn is far from an unfair reflection on the rest of the business.
Dan Coatsworth, investment analyst at AJ Bell, however, told This is Money: 'LVMH has lost its sparkle after a series of setbacks in recent years. It has focused too much on the aspirational market and these types of buyers have become more cash-conscious, watching their pennies rather than opening their wallets without a care in the world.
'In contrast, Hermes has explicitly focused on the ultra-rich and has enjoyed more resilient trading. LVMH might now be thinking hard about narrowing its customer focus as that could help to make its products more desirable, which is ultimately what luxury goods is all about.'
Is there a turnaround on the horizon?
LVMH still has exceptional brand strength, which Morningstar says will give it the edge against its peers.
The group's brands making up 29 per cent of the luxury leather market, compared to just 8 per cent for Hermes.
The firm's impressive storefronts and higher capital spending on retail may help its brands to stand out from their competition.
The strength of the brand remains, with LVMH having seen fashion and leather sales grow slightly better than the wider sector last year, though this dipped in the first quarter of 2025.
Coatsworth, however, said: 'LVMH has too many different interests. We're in an environment where companies are focusing on what they do best and jettisoning non-core assets. LVMH would be better if it just focused on fashion and got rid of the Sephora and DFS retail arms and its various food and drink operations.'
LVMH's brand strength, unwieldy though it may be, could combine with the potential for an upswing in the sector after the slowdown of the past few years.
Morningstar's Sokolova certainly thinks this is the case.
She told This is Money: 'We expect the luxury industry to return to growth after the current - and last year's - slowdown, driven by normalisation of demand in the US as post-pandemic excess spending is flushed out - a trend we've seen since 2023 - and as Chinese real estate prices stabilize, boosting consumer sentiment. '
LVMH derives around 24 per cent of its sales from the US, where consumer sending has also stalled.
Morningstar said: 'We estimate that post-pandemic excesses have been flushed out of the market, US luxury consumption should come back to growth from more normal levels. We expect US GDP to hold up stronger in the long term.'
China accounts for a significant portion of LVMH's sales, with Asia (excluding Japan), accounting for 30 per cent of LVMH sales.
China's economy is currently in a period of slow growth, with consumers remaining tight on spending.
In the first quarter, LVMH revenue from China fell by 11 per cent, with the second quarter expected to follow suit.
Sokolova said: 'Many Chinese spenders are still sitting on substantial savings following the pandemic. We expect LVMH to outperform the industry growth longer-term thanks to strength of the brands and substantial marketing budget.
'Once sentiment in key markets like China and the US returns to its pre-pandemic trajectory, we expect LVMH to leverage its brand strength and investment capabilities to emerge stronger and better positioned than ever.'