On Thursday, Bernstein SocGen Group updated its stance on L'Oreal SA (OR:FP) (OTC: LRLCY), downgrading the stock rating from Outperform to Market Perform and adjusting the price target to EUR 380 from EUR 430. The revision comes amid expectations of a normalization year for the beauty industry in 2025, following a particularly challenging 2024.
The stock currently trades near its 52-week low of $67.10, having declined over 21% in the past six months. InvestingPro data reveals the company maintains impressive gross profit margins of 74.15%.
The firm's analysts acknowledge L'Oreal's position as a top-quality company with strong long-term growth prospects. However, they anticipate that the brand's exceptional performance may be impacted by the recent slowdown of CeraVe, one of its popular skincare lines. This expected development has led Bernstein to project organic growth forecasts that are approximately 150 basis points below the consensus for the upcoming quarters.
According to InvestingPro's comprehensive analysis, L'Oreal maintains a strong financial health score of GOOD, with 12+ additional exclusive insights available to subscribers.
The new price target of EUR 380 for L'Oreal's stock is based on an enterprise value to earnings before interest, taxes, depreciation, and amortization (EV/EBITDA) multiple of 15.0x, slightly reduced from the previous 15.2x. This valuation adjustment reflects the firm's revised forward next twelve months (NTM) +1 EBITDA estimate of EUR 11,627 for L'Oreal.
Bernstein's reassessment suggests a more cautious outlook on L'Oreal's near-term performance, advising that the current moment may not be the most opportune for market participants to increase their positions in the company's stock. The firm's analysts have effectively recalibrated expectations in light of the broader industry trends and specific challenges faced by the beauty giant.
In other recent news, L'Oreal SA has been the subject of analyst attention with JPMorgan (NYSE:JPM) and Jefferies providing contrasting perspectives. JPMorgan downgraded L'Oreal's stock rating from Neutral to Underweight, citing concerns of a weakening global beauty market and its potential impact on the company's growth. The firm also revised the company's price target, lowering it from EUR390.00 to EUR325.00.
JPMorgan's downgrade reflects an anticipated normalization of growth for L'Oreal to about 4-5% over 2025-26, a rate not seen since 2017. The firm also predicts challenges to L'Oreal's top-line growth due to factors such as normalizing pricing and the emergence of local competitors.
In contrast, Jefferies upgraded L'Oreal's stock rating from Underperform to Hold, setting a new price target of €365.00. This decision was based on a reassessment of L'Oreal's performance relative to its global Home and Personal Care peers.
These developments reflect recent changes in the market dynamics and the company's performance. While JPMorgan anticipates a deterioration in profitability and growth for L'Oreal, Jefferies holds a more optimistic outlook, suggesting the company will maintain its current outperformance gap even as market growth normalizes.
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