Investing.com - Morgan Stanley lowered its price target on LVMH (OTC:LVMUY) to EUR565.00 from EUR635.00 while maintaining an Equalweight rating on the shares.
The firm expects LVMH's Fashion & Leather Goods division first-quarter 2026 sales to decline 1.5%, with soft improvements in U.S. and Chinese national spending offset by the lapping of the Murakami collaboration and the ongoing Middle East conflict. Morgan Stanley reduced its full-year 2026 EBIT estimate by 3%, placing it 2% below consensus.
Industry data and channel checks point to a weaker than initially anticipated start to the year, particularly for the Fashion & Leather Goods division. The division's two traditional growth engines, U.S. and Chinese nationals, remain flat year-to-date, leading Morgan Stanley to estimate the division's sales will contract year-over-year in the first quarter, compared to consensus expectations of 1.5% growth.
The division faces industry headwinds including weak spending on personal luxury goods, inability to recruit from the middle class, and disruption in the Middle East, as well as company-specific challenges such as cycling the Murakami collaboration at Vuitton and contraction at some smaller brands in the portfolio. Morgan Stanley downgraded the stock at the beginning of the year.
The stock has fallen 22% year-to-date, driven mostly by derating with forward price-to-earnings contracting from approximately 27x to 21x on 12-month forward consensus estimates. Shares currently trade at $108.60, near their 52-week low of $101.80, with the stock down nearly 25% in 2026. According to InvestingPro analysis, LVMUY appears undervalued at current levels, with the platform's Fair Value suggesting meaningful upside potential. An InvestingPro Tip notes the RSI indicates oversold territory, while the company maintains impressive gross profit margins of 66% despite current headwinds. With the group and Fashion & Leather Goods division likely expanding at a pedestrian rate of 2% to 3% in 2026 at constant foreign exchange, Morgan Stanley does not expect the valuation multiple to expand in the medium term.
In other recent news, LVMH reported second-half 2025 earnings that surpassed analyst expectations, with EBIT reaching €8.7 billion. This figure represents a 2% decrease year-over-year but is 7% ahead of consensus estimates. The company showed improved cost control, which contributed to a 60 basis point improvement in EBIT margin. Meanwhile, Kepler Cheuvreux lowered its price target for LVMH to €680, citing higher taxes and increased financial expenses, though it maintained a Buy rating. Morgan Stanley downgraded LVMH from Overweight to Equalweight, expressing concerns about valuation as the stock trades toward the high end of its long-term range. In contrast, TD Cowen raised its price target to €700, citing stabilizing trends in the Chinese market and resilience in the U.S. market. The firm adjusted its fourth-quarter organic sales estimates to flat, differing from the Street's expected 0.5% decline. These developments reflect a mix of positive and cautious sentiment among analysts regarding LVMH's financial outlook.