In a report released today, David Hayes from Jefferies maintained a Sell rating on L’Oreal, with a price target of €340.00.
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David Hayes has given his Sell rating due to a combination of factors, primarily focusing on L’Oreal’s growth prospects and valuation concerns. Despite an anticipated 4.7% like-for-like growth in the third quarter, which is slightly below the consensus estimate of 4.9%, the market growth estimate for the same period is 5%. This suggests that L’Oreal’s performance may not be strong enough to justify a positive re-rating, especially given the company’s current valuation.
Furthermore, while the North American market is expected to show relatively strong growth in the third quarter, this is anticipated to normalize in the fourth quarter. The region is also dealing with a significant headwind due to the unwinding of a shipment impact, which affects the overall sales growth. These factors, combined with a high next twelve months price-to-earnings ratio and a free cash flow to equity yield of 3.3%, contribute to the Sell rating as the financial metrics do not support a favorable outlook for L’Oreal’s stock.
In another report released on September 11, Deutsche Bank also maintained a Sell rating on the stock with a €340.00 price target.