Investing.com -- EssilorLuxottica (EPA:ESLX) received an upgrade to a "buy" rating from analysts at Jefferies, reflecting growing confidence in the company’s positioning and market potential.
In a note dated Tuesday, Jefferies analysts cited the optical giant’s leadership in a steadily expanding market and its drive for innovation as key factors supporting the rating upgrade.
The company, which dominates the global eyewear market with a share exceeding 20%, is benefiting from a series of technological advancements and a strong retail presence.
Jefferies pointed to EssilorLuxottica’s foray into smart eyewear through its partnership with Meta (NASDAQ:META) on Ray-Ban Meta glasses, its expansion into hearing care with Nuance Audio, and its role in myopia management solutions as major contributors to future growth.
According to the analysts, EssilorLuxottica is poised for accelerated earnings growth, with revenue projected to climb from €25.4 billion in 2023 to €30.8 billion by 2026.
The analysts flag that despite challenges in achieving its 19-20% margin target by 2026, the company remains committed to long-term expansion, with operating leverage and new product categories expected to drive future gains.
Jefferies also noted that the U.S. market, which accounts for over 40% of EssilorLuxottica’s sales, remains under scrutiny.
A recovery in consumer sentiment could serve as a catalyst for further upside, while potential U.S. tariffs on imported eyewear are being closely monitored.
The upgrade is accompanied by a price target increase to €310 per share, representing a 15% upside from the current trading level of €270.70.
The analysts argue that EssilorLuxottica’s valuation remains attractive despite a strong performance over the past year, citing a 10% discount to luxury sector peers.
With a broadening partnership with Meta potentially on the horizon and ongoing consolidation in the fragmented optical market, Jefferies sees EssilorLuxottica as well-positioned for sustained growth in the coming years.
Shares of the French company were up 1.2% 07:20 ET (12:20 GMT).