Luxury giant LVMH's stock continues to face pressure. Although its valuation has fallen to near historic lows, sluggish growth at its core brands and weak luxury demand are still keeping investors cautious about its recovery prospects.

Morgan Stanley reiterated its Equalweight rating on LVMH on October 8, maintaining a target price of 450 euros. Meanwhile, HSBC Holdings PLC (ASX: HSBC) recently downgraded LVMH from Buy to Hold, cutting its target price from 600 euros to 490 euros.

Shares Down 60% From 2023 Peak, Valuation Near Historic Lows

LVMH shares have fallen about 41% year-to-date and are down roughly 60% from the high set in July 2023. Morgan Stanley noted that the company's current valuation sits at the 6th percentile of its historical range over the past 15 years, meaning it is cheaper than approximately 94% of levels during that period. LVMH-Moet Hennessy Louis Vuitton (ASX: LVMUY) last traded at $87.07, just about 3% above its 52-week low of $84.62, with a price-to-earnings ratio of 17.7 times. From a valuation standpoint, the stock is already at historically low levels. However, investors are clearly divided on whether the low valuation is sufficient to compensate for the operational risks the company faces. With LVMH set to report earnings next Monday, market attention has shifted to whether its core brands can return to growth.

Louis Vuitton Growth Shows Signs of Fatigue, Dior Recovery Falls Short of Expectations

Morgan Stanley noted that the Louis Vuitton brand, which generates annual sales of approximately 20 billion euros, is showing signs of growth fatigue. As one of LVMH's most important brands, its performance directly affects the group's earnings outlook. At the same time, Dior's business recovery has also fallen short of some investors' earlier expectations. In 2025, Dior appointed Jonathan Anderson as creative director, and some investors had expected this change to drive a V-shaped rebound in brand sales, but actual performance a year later has not delivered on that expectation.

Fashion and Leather Goods Contribute Over 70% of Operating Profit, HSBC Downgrades Rating

Before Morgan Stanley reaffirmed its cautious stance, HSBC had recently downgraded LVMH shares from Buy to Hold and lowered its target price from 600 euros to 490 euros. HSBC's downgrade mainly reflects the operational challenges facing the soft luxury market, particularly LVMH's heavy reliance on its fashion and leather goods business. In fiscal year 2025, the fashion and leather goods division contributed 47% of LVMH group sales and 72% of earnings before interest and taxes. This means the division's performance has a decisive impact on the group's overall profitability, and slowing growth at core brands could place considerable pressure on group profits.

Currently, both Morgan Stanley and HSBC hold a cautious view on LVMH's near-term performance. Although the sharp stock correction has pushed its valuation back to historic lows, weak Louis Vuitton growth, slow Dior recovery, and weakening luxury demand remain key issues investors will focus on in the upcoming earnings report.