EssilorLuxottica: stock down as UBS starts to worry

(CercleFinance.com) - EssilorLuxottica suffered one of the biggest falls in the CAC 40 index on Wednesday following a downgrade by UBS, which the Swiss bank justified by the prospect of less predictable consumption against a background of persistent inflation.


At around 3.30pm, the stock was down by around 1.8%, while CAC 40 was almost afloat 0.2%.

In its morning comments, UBS said it had downgraded its rating on the stock from "buy" to "neutral", with a lower target price of 183 euros (vs. 210 euros).

Although it points out that EssilorLuxottica's business cannot be considered as consumer discretionary (i.e. unconstrained) due to its 75% exposure to optical lenses, the broker highlights, on the basis of recent discussions with industry players, an increased risk of consumers postponing purchases.

This could lead to longer replacement cycles, which in turn could hurt revenue growth, and inflationary pressures on profit margins, the analyst said.

With this in mind, UBS explains that it prefers to stay away from the stock until it has better visibility (no pun intended!) on business volumes and inflationary pressures.


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