An LVMH trading and financial update – Is now the time to buy?
Let's revisit the LVMH investment case!
Today, I want to introduce you to a new posting format here on Rijnberk InvestInsights. This format will be exclusively for paid/premium subscribers and will sit alongside my freely accessible Sunday Deep Dives and occasional earnings reviews (so there is still plenty of free content to be found!).
In these trading and financial updates, I will shortly update my financial projections, price targets, and ratings on companies I have covered before. This can be following quarterly results, corporate developments, notable share price developments, or simply because it has been a while since I discussed the shares.
Simply put, I will give you a short update on the business and developments and actionable insights regarding my updated financial projections and target price. Hopefully, this will allow you to get quick and actionable investment ideas.
This week, the company and thesis in question will be LVMH or Moët Hennessy - Louis Vuitton, Société Européenne. For those unfamiliar with it, LVMH is the largest luxury goods conglomerate in the world and a real stalwart. The company has an almost $400 billion market cap, making it one of the largest European companies, and owns some of the highest-end luxury brands like Dior, Louis Vuitton, Fendi, Tiffany & Co., Loewe, Celine, Bulgari, Tag Heuer, and Givenchy. Notably, it acquired luxury brands such as Dior and Tiffany as recently as 2017 and 2021, indicating it is not sitting still either but rapidly expanding its empire.
In total, the company owns a staggering 75 luxury brands, which it defines as luxury fashion houses. The company reports and operates across five primary segments: Wines and Spirits, Fashion and Leather Goods, Perfumes and Cosmetics, Watches and Jewelry, and Selective Retailing.
This esteemed portfolio of brands allowed LVMH to report a whopping $86.2 billion in revenue in 2023, reflecting a 20-22% market share in the personal luxury goods market, which is pretty insane considering this highly fragmented and huge market. Even more impressively, the company doubled its market share from 12% in 2018, partly due to the acquisition of Dior and Tiffany and the company’s excellent execution.
In other words, this is one of the best businesses in the world, which has grown revenues at a CAGR of 11% over the last decade.
All of this considered, I rated shares a “Buy” in February. Its historical multiple of 26x seemed fair for this incredibly high-quality business, translating into a target price of €921, leaving an annual upside of 11%, including dividends.
However, shares have retracted close to 8% since, underperforming the S&P500, which returned a positive 10% in this same time frame. So, have LVMH shares become even more attractive, or is there a good reason for this underperformance?
Let’s review the last few months and update our financial projections!