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While hopes for vaccines are reborn and demand is picking up in Europe and the United States, stock warrants allow the global luxury goods giant to bet on a performance of 44% in two months.
The very imminent arrival of vaccines against Covid-19 was like a bomb on the Paris Stock Exchange. Among the stocks that are recovering in value, LVMH is certainly experiencing the most spectacular surge in mid-November 2020. In addition, the firm recently purchased the jeweler Tiffany – for a slightly lower price of $15.77 billion – which augurs well for sales in the United States, where consumption is expected to rise again until the health crisis is resolved. Similarly, Europe is expected to gradually recover its revenues once airport restrictions and containment measures are lifted. Finally, the recovery of activities already underway in China is another growth driver for the luxury goods sector, particularly LVMH.
All of these reasons represent an opportunity for the French luxury giant to return to growth next year. In the third quarter, the Group already recorded revenues that were well above the expectations of financial analysts. Thanks to its sales of Hennessy cognac and its “fashion & leather goods” division, LVMH actually posted a decline of only 7% to 11.95 billion dollars.
At present, the LVMH share price is 28.7 times higher than the anticipated profits for 2021. Although the recent surge in the share price may moderate over the next few days, a stability would help maintain this momentum. This certificate is issued by Société Générale, which has set a maturity date of January 15, 2021, as well as two price limits, the lowest limit being 330 euros and the highest 510 euros. LVMH expects the value of its shares to increase by 43.7% in just two months.
One condition, however, is that the value of the share must remain within the fluctuation limits set, i.e. 330 and 510 euros respectively. Consequently, LVMH is taking a risky gamble, since the assumption that the value of its share would fall outside the specified fluctuation range is very high. The occurrence of such a scenario would mean the loss of the entire value of the stability, which could give rise to some apprehension…
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Featured photo: © LVMH[/vc_column_text][/vc_column][/vc_row]
