LVMH Moët Hennessy – Louis Vuitton has experienced a sharp 44% drop in share price from its all-time highs two years ago. After a period of extraordinary post-pandemic growth, many analysts are calling the decline a normalization rather than a structural downfall. While the luxury giant faced rough financials in the recent quarters, some believe this dip in LVMH’s stock price presents a unique opportunity for long-term investors.

Normalization After Pandemic Peaks

The remarkable stock surge of 46% annualized returns from March 2020 to April 2023 now appears unsustainable. The post-pandemic luxury boom, where LVMH thrived, saw the stock price spike, but it was not to last. As LVMH now faces a 44% drop, the company’s fundamentals are showing signs of stabilization, bringing the share price closer to a more sustainable level.

Despite the revenue downgrades and margin declines, the valuation of LVMH has become more attractive. Analysts suggest the market has overestimated the impact of temporary factors and that the stock is now undervalued relative to its historical P/E ratio, sitting at 19, below its 20-year average of 22.

Bumpy Financials But Room for Growth

LVMH’s Q1 2025 performance has been bumpy, with a notable double-digit decline in its Asia market, the company’s largest by revenue. However, Europe’s 2% growth offered some relief. The company’s most profitable segment, Fashion & Leather Goods, saw a 5% drop in sales during the first quarter, while Wines & Spirits were the most affected, though it only represents 6% of total sales.

Despite the challenges, LVMH’s operating margin remains well above pre-pandemic levels at 23%, signaling the company’s ongoing operational strength.

Valuation: Is It Time to Buy?

The current price-to-earnings ratio of 19 places LVMH at a discount compared to its luxury peers like Hermès, which trades at three times the valuation of LVMH. This lower valuation, combined with the company’s still-strong profitability, suggests that LVMH is undervalued relative to its competitors and historical performance.

In addition to its favorable earnings yield and cash flow yield, which imply steady growth expectations, analysts are revising their revenue growth and margin assumptions downward, presenting an opportunity for a positive surprise if expectations are met.

Global Factors: A Shift Toward European Luxury

The US-China trade tensions and global product boycotts may also shift spending toward European brands like LVMH, particularly as consumers move away from American products. This trend could potentially free up more disposable income for European luxury goods, further benefiting brands like Louis Vuitton and its parent company.

Conclusion: A Buy Opportunity?

While LVMH faces short-term hurdles, its long-term potential remains strong. The company’s reduced valuation, coupled with its dominant position in the luxury market, makes it an attractive investment for those looking to take advantage of short-term market corrections. If the company’s current financial difficulties normalize, LVMH is poised for modest growth, making it a solid international stock to consider.

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