Investing.com -- Stifel has raised its price target for EssilorLuxottica SA (EPA:ESLX) from €207 to €241, citing significant potential from its partnership with Meta Platforms (NASDAQ:META).
The collaboration, which began in 2019, has already yielded the Ray-Ban Meta smartglasses, a product Stifel describes as a "game changer" in the nascent smartglasses market.
The latest Ray-Ban Meta model, launched in September 2023, has been the only smart glasses to achieve mass-market success.
Stifel highlights several reasons for the success of Ray-Ban Meta smartglasses, including their integration of connected features into the iconic Ray-Ban frame, the minimal five-gram weight increase ensuring comfort for extended use, and a highly competitive $299 (€329) price point compared to standard Wayfarer glasses.
Looking ahead, the investment bank expects smartglasses to contribute significantly to EssilorLuxottica’s future growth. Sales from the segment are projected to reach €3.7 billion by 2032, accounting for 9% of total revenue and adding 90 basis points to the company’s compound annual growth rate (CAGR) for sales during 2024-2032.
Profitability, which is currently dilutive, is anticipated to turn accretive by 2029 as the business scales.
According to Stifel, the Meta partnership positions EssilorLuxottica at the forefront of the smart glasses revolution. The second-generation Ray-Ban Meta smartglasses feature improved technology, such as enhanced video recording and real-time AI capabilities.
The investment bank draws a strong parallel between the emerging smart glasses market and the early days of smartwatches.
“We estimate Ray-Ban Meta will have a 35% share of the smart glasses market by 2032 (versus c.70% today) with accretive profitability (vs. below average today),” Stifel analysts said.
Stifel acknowledges several risks for EssilorLuxottica, including competitive threats from Apple (NASDAQ:AAPL), which could accelerate market growth but also challenge EssilorLuxottica's dominance.
Furthermore, privacy and regulatory concerns in regions like the EU, where Meta AI's functionalities are partially restricted, remain a hurdle.
Despite the positive outlook, Stifel maintains its Hold rating on EssilorLuxottica, believing that much of the Meta partnership's potential is already reflected in the stock price. However, the prospect of Meta acquiring up to a 5% stake in the company could create volatility.