EssilorLuxottica Eyes Growth with Elevated Stock Target

EssilorLuxottica Stock Target Increased by Stifel

Stifel has boosted its price target for EssilorLuxottica SA (EPA: ESLX) from €207 to €241, driven by the exciting potential of its collaboration with Meta Platforms (NASDAQ: META).

Advancements from the Meta Partnership

This partnership, which took off in 2019, has already produced the Ray-Ban Meta smart glasses, hailed by Stifel as a revolutionary product in the emerging smart glasses market. The newest iteration was launched in September 2023 and has set itself apart as the only smart glasses to achieve significant popularity among consumers.

Success Factors of Ray-Ban Meta Smart Glasses

Stifel points to several factors contributing to the success of Ray-Ban Meta smart glasses. The integration of advanced features into the classic Ray-Ban frame has captivated users, along with a slight weight increase of just five grams, ensuring comfort for prolonged use. The price point of $299 (€329) is also very competitive compared to traditional Wayfarer glasses.

Looking to the Future of Smart Glasses

As smart glasses gain traction, Stifel forecasts that this product line will be a substantial contributor to EssilorLuxottica’s growth moving forward. Sales from this sector are anticipated to soar to €3.7 billion by 2032, representing 9% of the company's total revenue and enhancing its compound annual growth rate (CAGR) for 2024-2032 by 90 basis points.

Projected Profitability Shifts

Currently viewed as dilutive to profitability, this segment is expected to turn profitable by 2029 as the business matures and scales. The collaboration with Meta positions EssilorLuxottica as a leader in the evolving smart glasses landscape.

Technological Innovations and Market Position

The second-generation Ray-Ban Meta smart glasses bring forth enhanced features, including improved video recording and real-time AI capabilities. This positions the product strongly in a competitive market, and Stifel draws comparisons between the growth of smart glasses and that of the early smartwatch era.

Stifel projects that by 2032, Ray-Ban Meta will command a market share of around 35%, a significant decrease from the estimated 70% today, as profitability becomes more favorable.

Risks to Consider

However, there are risks outlined by Stifel regarding EssilorLuxottica. One major concern is competition from Apple (NASDAQ: AAPL), which may drive market growth but also pose challenges to EssilorLuxottica's market share. Additionally, privacy and regulatory hurdles in various regions, particularly within the EU where certain functionalities of Meta AI might be restricted, could impede progress.

Cautious Optimism Amidst Stock Reflections

Despite a positive outlook for the partnership with Meta, Stifel retains its Hold rating on EssilorLuxottica. Analysts suggest that a lot of the expected growth associated with the Meta collaboration is already reflected in the current stock price. Nevertheless, the possibility of Meta acquiring a stake of up to 5% in the company may introduce volatility.

Frequently Asked Questions

What is the new price target for EssilorLuxottica set by Stifel?

The new price target set by Stifel for EssilorLuxottica is €241, raised from €207.

What product has resulted from the EssilorLuxottica and Meta partnership?

The partnership has produced the Ray-Ban Meta smart glasses, which have gained significant consumer appeal.

How much revenue is projected from smart glasses by 2032?

Sales from smart glasses are projected to reach €3.7 billion by 2032, accounting for 9% of total revenue.

What are some risks mentioned for EssilorLuxottica?

Risks include competition from companies like Apple and potential regulatory challenges, especially concerning privacy.

Why does Stifel maintain a Hold rating on the stock?

Stifel believes that much of the potential from the Meta partnership is already included in the stock price, prompting a cautious approach.

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