L'Oréal: Société Générale downgrades buy rating
(CercleFinance.com) - Societe Generale (SG) no longer recommends investors buy the L'Oreal share, saying that they should "hold" it for valuation reasons.
Although the broker has increased its 12-month target price from 215 euros to 240 euros, is still has limited upside potential.
Indeed, a note says, the expansion of the global cosmetics market accelerated to 5.5% in 2018, and L'Oréal's organic sales growth reached 7.1%, its highest level of the decade. In addition, its operating margin has improved.
According to SG, the new fiscal years looks good: " Prospects for 2019 look solid as e-commerce is increasing the penetration of beauty worldwide," its report says, which believes that "L'Oréal's relative growth could improve further in 2019." L'Oréal has seen no slowdown in China in the fourth quarter (2018), nor in January (2019), and it expects to outperform its market this year once again. Finally, it is still possible that Nestlé's position, which holds 23% of the group's capital, changes.
As a result, SG has raised its earnings estimates, which explains why it has increased its target price for the share. However, its potential (with implied TSR of 15%) is considered too low relative to its current price, which explains why the broker has downgraded its rating on the stock.
Copyright (c) 2019 CercleFinance.com. All rights reserved.
The information and analyses distributed by Cercle Finance are only intended as decision-making support for investors. Cercle Finance's responsibility may not be entailed, either directly or indirectly following the use of such information and analyses by readers. Any non-professional investor is recommended to consult a professional advisor before making any investment decision. This indicative information in no way constitutes any invitation to sell or buy securities.
Although the broker has increased its 12-month target price from 215 euros to 240 euros, is still has limited upside potential.
Indeed, a note says, the expansion of the global cosmetics market accelerated to 5.5% in 2018, and L'Oréal's organic sales growth reached 7.1%, its highest level of the decade. In addition, its operating margin has improved.
According to SG, the new fiscal years looks good: " Prospects for 2019 look solid as e-commerce is increasing the penetration of beauty worldwide," its report says, which believes that "L'Oréal's relative growth could improve further in 2019." L'Oréal has seen no slowdown in China in the fourth quarter (2018), nor in January (2019), and it expects to outperform its market this year once again. Finally, it is still possible that Nestlé's position, which holds 23% of the group's capital, changes.
As a result, SG has raised its earnings estimates, which explains why it has increased its target price for the share. However, its potential (with implied TSR of 15%) is considered too low relative to its current price, which explains why the broker has downgraded its rating on the stock.
Copyright (c) 2019 CercleFinance.com. All rights reserved.
The information and analyses distributed by Cercle Finance are only intended as decision-making support for investors. Cercle Finance's responsibility may not be entailed, either directly or indirectly following the use of such information and analyses by readers. Any non-professional investor is recommended to consult a professional advisor before making any investment decision. This indicative information in no way constitutes any invitation to sell or buy securities.