LVMH stock down 4.2% as Morgan Stanley cuts rating on stretched valuation

Highlights

LVMH stock dropped 4.2% to €583.90 following a Morgan Stanley downgrade on valuation concerns.
Analysts see limited near-term upside due to slowing luxury demand and trimmed earnings forecasts through 2026.
Technical signals point to continued weakness unless the stock can reclaim resistance near €620

Morgan Stanley downgraded LVMH from Overweight to Equalweight, citing stretched valuation metrics and a reassessment of forward growth expectations. Their note emphasized that while LVMH remains the leader in the global luxury sector, the upside to their price target of €635 is now limited. The bank also trimmed its 2026 earnings per share forecast by around 4%, reflecting a more conservative view on the recovery in key markets such as China.

This shift comes amid growing concerns that global luxury demand has peaked in the post-pandemic cycle. Several luxury names, including Richemont and Kering, have also faced pressure as discretionary spending slows. LVMH’s Q3 earnings report already hinted at softer organic sales growth, especially in Fashion & Leather Goods, the company’s most profitable division. Analysts are closely watching whether this trend will persist into Q4 and early 2026.

Geopolitical uncertainty, inflationary headwinds, and changing consumer spending patterns are also weighing on sentiment across the luxury sector. China’s uneven economic recovery and reduced tourist flows to Europe continue to limit upside, especially in the high-margin boutique channel. Despite the group’s strong brand portfolio—Louis Vuitton, Dior, and Tiffany & Co.—investors are questioning whether premium multiples can be sustained without a clear reacceleration in top-line growth.

Technical setup points to range-bound trading with weak momentum

Recent technical indicators confirm the stock is trading well below its 50-day and 200-day moving averages, currently near €681 and €743, respectively. The sharp drop has pushed the RSI toward oversold territory, now reading below 35, suggesting further downside may be limited in the immediate term, though recovery momentum is absent.

Key short-term support lies near the €570 psychological level. If this level breaks, a further decline toward the €545–550 zone is possible. On the upside, resistance remains at the €615–620 range, which coincides with a previous breakdown zone and 20-day moving average. A sustained move above €640 would be needed to negate the current downtrend and re-establish upward momentum. However, with the stock now trading in a volatile downward channel, the near-term bias remains neutral-to-bearish.

LVMH stock price dynamics (November 2025 - January 2025). Source: TradingView.

LVMH’s valuation has also come under pressure. The forward P/E ratio is still elevated at approximately 24.5x, significantly above its five-year average. With earnings growth expected to moderate in 2024 and only reaccelerate in 2025, current multiples are facing resistance in the absence of clear positive catalysts. The EV/EBITDA ratio has also climbed back above 15x, a level that previously attracted institutional profit-taking.

Near-term bearish bias, medium-term stabilization possible

In the short term, the technical and fundamental setup favors a cautious stance. If LVMH fails to hold above €570, selling pressure could intensify, pushing the stock toward €550 or even €530 in a risk-off environment. This scenario could play out if Q4 earnings show further deceleration, or if the Chinese consumer recovery stalls further into the first half of 2026.

The base case assumes that the stock stabilizes between €570 and €620, a zone where long-term investors may accumulate positions in anticipation of a 2026 recovery. This would align with recent analyst revisions that suggest earnings momentum could return once macro headwinds ease.

Succession tensions are mounting within the Arnault family as Bernard Arnault, 74, slowly hands over control of LVMH to his five children. Insider reports point to emerging disputes, especially around leadership roles in Dior and Moët Hennessy.

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