(News Bulletin 247) – The luxury group benefits from the support of Stifel, which raises its target price. The reopening of China combined with a strong desirability of its brand portfolio could push the stock higher still.

While LVMH should publish its sales for the first quarter of 2023 in April, Stifel gives some keys to the market a few weeks before this major meeting with the financial community. The research department expects a solid start to the year for the French luxury giant, whose capitalization now exceeds the 400 billion euro mark.

The design office, which is the buyer of the file, gave a boost to the price target assigned to the title of the French luxury giant to now target 895 euros (against a course revolving around 817.9 euros on Monday around 3:30 p.m.). Stifel indicates in its note that it has raised its earnings per share forecast by 1% for the years 2023-2025, “due to higher organic growth assumptions”.

Strong pricing power

For Stifel, LVMH is well positioned to take advantage of the reopening of the Chinese economy. The research office notes “encouraging signs” of a gradual resumption of foreign travel by Chinese travelers.

“At the same time, LVMH has strong pricing power, a proven defensive track record for its fashion and leather business in past economic downturns and a strong brand portfolio that benefits from the usual flight to quality when the external environment hardens”, abounds the design office.

In China, for example, LVMH indicated in mid-February that it wanted to increase its prices by up to 20% for its flagship brand Louis Vuitton. The French group thus intends to take full advantage of the strong rebound in Chinese demand after the easing of measures linked to the Covid-19 pandemic in the country.

According to Stifel, this favorable alignment of the planets should allow LVMH to post “organic sales growth of +10% in the 1st quarter of 2023, slightly higher than that of +9% in the 4th quarter of 2022, thanks to an increase of 11% for fashion and leather goods, – the group’s flagship division – and +14% for Selective Retailing”.

Last week, Oddo also recalled the importance of the recovery of the Chinese economy for the activity of LVMH. The design office recalls that LVMH sees “clear signs of recovery” in China, with “a more visible acceleration from the end of March with a basis of comparison which will become very favorable”.

2023, “a very good year”

On the sidelines of its annual results, LVMH then declared to approach 2023 “with confidence”. “I am quite confident for 2023. If the start of the year is confirmed, if the opening of China is confirmed, (…) the start is extremely strong (…), it should be a very good year”, has declared for his part the CEO, Bernard Arnault, to analysts.

“I am quite confident that the Chinese leaders are using the period that is opening up to revitalize Chinese growth. If this is the case, we have every reason to be confident or even optimistic on the Chinese market. For example in Macau, where the Chinese can now surrender, the evolution is incredible, the stores are full, it’s back with a fairly sustained regime, “he then explained.

On the Paris Stock Exchange, Stifel’s support goes completely unnoticed. The action of the luxury giant gains only 0.4% around 3:20 p.m. where its benchmark index, the CAC 40, shows an increase of more than 1%.