UBS Downgrades EssilorLuxottica
Investing.com — On Tuesday, UBS downgraded EssilorLuxottica SA (EPA:ESLX) shares from Buy to Neutral, citing near-term risks despite a positive outlook influenced by potential US tariffs and changing consumer habits, alongside the stock’s valuation.
Strong Performance in 2024
EssilorLuxottica’s shares have increased by 27% year-to-date, outperforming the MSCI Europe (Textile Apparel and Luxury) index by 37%. Currently, the stock’s price-to-earnings ratio stands at approximately 29 times the forecasted FY25 earnings.
Growth Expectations
UBS noted prospective acceleration in top-line growth from Q4 2024, propelled by innovation and mergers and acquisitions (M&A). Positive factors include EssilorLuxottica’s defensive positioning and the strengthening USD, with approximately 43% of sales derived from the US.
Revised estimates predict a 6.3% growth in 2025, including a 2 percentage point boost from M&A. Projected regional growth rates are North America at 5.2%, EMEA at 6.2%, APAC at 10.0%, and LatAm at 8.3%.
Additionally, UBS anticipates a 110 basis point improvement in EBIT margin due to foreign exchange effects, bringing it to 17.9%.
Future Considerations
For 2025, UBS highlights key focus areas including:
– Recovery of the US sun market
– Balance between price-mix and volume growth
– Advancements in new products like hearing aids and Ray-Ban Meta smartglasses
– Potential FDA approval for Stellest in the US
Identified Risks
Analysts pointed out risks such as:
– Impact of US tariffs on imports from China and Mexico
– Delays in FDA approval for Stellest
– Slower margin expansion than expected
– Significant currency depreciation in key emerging markets
Price Target
UBS has set a price target for EssilorLuxottica at €248, indicating a 9% potential upside from current levels.
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