LVMH Gains on Strong U.S. Demand, Morgan Stanley Sees More Upside

LVMH Moët Hennessy Louis Vuitton (LVMH), the world's leading luxury goods group, has seen its shares gain momentum following a recent upgrade by Morgan Stanley. The investment bank raised its rating on LVMH from 'equal weight' to 'overweight,' citing materially improved prospects for the company. This upgrade comes despite the analyst acknowledging that LVMH will face challenges in 2025, such as difficulties with certain brands and divisions.

Morgan Stanley's upgrade is based on more favorable industry dynamics and company-specific factors, including improving prospects at key brands like Vuitton, Tiffany, and Bulgari. The analyst also points to the potential positive shift at Dior, with rumors that Loewe's creative director Jonathan Anderson may be appointed to the same role at Dior. This could further boost the performance of the Watches & Jewelry division, as Dior is a significant player in this segment.

The recovery in Chinese consumer demand is expected to have a positive impact on LVMH's overall performance, particularly in the Watches & Jewelry division. Luxury brands such as Richemont and Burberry have reported less severe declines or stabilization in sales in China, which could bode well for LVMH. Morgan Stanley believes that LVMH's stock still offers upside potential in terms of valuation, with a forward PE ratio of 24.8x, which is within its 10-year range but at a significant discount compared to Hermes. The firm set a LVMH price target of €820, indicating a 14% upside to the current share price.

In conclusion, LVMH's recent gains and Morgan Stanley's upgrade reflect the company's strong prospects, driven by favorable industry dynamics and company-specific factors. The recovery in Chinese consumer demand and the potential positive shift at Dior further support the analyst's bullish view on LVMH's stock. Investors should consider LVMH as a strong contender in the luxury goods market, with potential for further upside in the coming months.