(This peace was written on the 21st of July 2025)
I’d like to get your attention on LVMH, an European giant that needs no introductions.
LVMH’s current price of 470€ is starting to get into purchasable territory. As a disclaimer, I have my entry price point at 420€ (don't ask). With future earnings expected to decline until the end of 2025, there is a forecast where 2026 starts a path to recovery from 10.99 EPS (second half of 2025) to 14.95 EPS in H1 2026. Making it an annualized transition from 23.33 (2025) to 26.06 (2026), with a CAGR of ~9.57% growth until 2028.
When not accounting for a change in price to earnings (which is currently at a below average multiple) this could translate into gains from 420€ (my entry price point) to ~605€.
According to my highly subjective DCF analysis (20% discount rate!)... LVMH fair value lands around 640€, a debatable number, but that's what I am running with as an assumption.
Fundamentally speaking, what would I like to see to make me feel confident about the future of LVMH? I would like the company to contain their debt (especially the short-term portion of LT debt). I'd like to get a bit leaner with operations, meaning firing the excess 20.000 people that got added since 2022 (my reference year for this entire analysis).
When it comes to "cost of goods", LVMH got hit by inflation in 2022 pretty bad, but that didn't make much of a dent in terms of gross margins. This leads me to believe in their ability to pass costs on to the consumer. Probably a luxury sector thing. However, while their top line remains resilient, their net margins got slimmer over the last couple of years (from 17-18% to 12%) and I believe it is more of an operational problem than an inflation issue.
I do not like to dwell on macro, but for reference... There has been a decline in their champagne and spirits business since 2022 (which is not their most profitable part of the business), but that combined with the fact that the US is their biggest market... One could make the case that their chances of matching earning projections are the lowest they've ever been, if we consider tariffs and shit. Thus increasing perceived risk. I believe that's what the market is probably pricing in.
What remains to be known is:
How much is the market overreacting to the fair projections? With Price-to-sales at ~2.8, I assume the market is not pricing in much of their future. That's where the risk-adjusted returns could speak to some investors willing to bet on LVMH recovery.
Their management is known for being predator-like, but solid. For those willing to sit 3 years with European stock and having market-average returns, it's a buy anywhere between now and 420€ in my opinion. For a more comprehensive analysis I'd go look for expectations within the sector and see how it fairs against some competitors, Hermes being the best one fundamentally speaking.
These are just some thoughts, I do not feel strongly about the company, I do not have a position open, and I am not emotionally attached to it.
Have other thoughts on LVMH Moët Hennessy - Louis Vuitton Société Européenne?
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