LVMH's Shares Unsuitable for Inflation Resistance
In the ever-changing landscape of the global economy, one constant remains: the enduring appeal of luxury goods. This week, the US Federal Reserve raised the federal funds rate by 75 basis points, a move that has sent ripples through the financial world. Yet, amidst this economic turbulence, the world's leading luxury goods conglomerate, LVMH, continues to thrive.
LVMH, with its 5,000 stores spanning 80 countries and 75 houses under its umbrella, has demonstrated resilience in the face of adversity. Despite a 14 percent decrease since the beginning of the year, the stock has shown potential for growth, with the current price at 630 euros. This optimistic outlook is supported by recent forecasts and market analyses, which favour a buy or accumulate stance for the near term.
The conglomerate had already reacted swiftly at the beginning of the year and adjusted prices, positioning itself well in the face of tightening monetary policy and rising interest rates worldwide. Central banks, including the US Federal Reserve, are tightening their monetary policy and raising interest rates to combat inflation, which currently stands at 8.2 percent in the US and over 10 percent in Germany.
LVMH's stock has gained about 17 percent since June, a testament to its robust fundamentals. Analysts predict growth of over 20 percent in both revenue and earnings per share for LVMH. The company's dividend yield of 1.2 percent and a price-to-earnings ratio of around 20 for the current fiscal year are well below its average of approximately 24 over the past 13 years, suggesting the stock is reasonably priced for growth.
Key indicators to watch include the ramp-up of 15 new U.S. flagship stores planned by 2026 and the strong growth of Tiffany’s U.S. sales (up 8 percent in Q1 2025), showing successful integration and expansion efforts that could drive future revenue and share price appreciation.
However, investors should remain attentive to geopolitical and regional market risks, especially in Asia, which could affect volatility. LVMH's business was more challenging in the Chinese market, but with lockdown restrictions being eased, growth can accelerate there. Notably, LVMH managed to remain profitable during both the financial crisis and the COVID-19 pandemic, a testament to its unique pricing power and solid balance sheet.
In summary, while LVMH’s stock has already gained strongly in recent weeks, current forecasts and expert analyses favour a buy or accumulate stance for the near term, predicated on solid fundamentals, growth initiatives in the Americas, and technical support levels around €630. Despite global crises and economic uncertainties, LVMH's demand for luxury goods may potentially decrease to some extent. However, the company's strategic moves and diversified product portfolio, which includes champagne, fashion, perfumes, and watches, position it well for continued growth in the medium to long term.
Despite the economic turbulence caused by the US Federal Reserve's interest rate hikes, luxury conglomerate LVMH's stock remains resilient, indicating potential growth. Analysts predict a growth of over 20% in both revenue and earnings per share for LVMH, with a dividend yield of 1.2% and a price-to-earnings ratio of around 20, suggesting the stock is reasonably priced for growth. Despite short-term challenges in the Chinese market, LVMH's strategic moves and diversified product portfolio position it well for continued growth in the medium to long term.
