This report is an updated version of the report published on 2 December 2024 at 12:39 PM AEDT.

Lovisa Holdings Ltd (ASX: LOV)

Lovisa Holdings Limited (ASX: LOV) is an Australian-based global fashion jewelry retailer. The company designs, develops, and retails affordable and trend-driven jewelry and accessories.

Recommendation Rationale - SELL at AUD 29.88

• Facing Resistance: LOV is trading around Resistance 1 level recommended on 20 November 2024; thus, it can face resistance at the current levels.
• Overvalued Multiples: On a forward 12-month basis – key trading multiples (EV/Sales, EV/EBITDA, Price/Earnings, and Price/Cash Flow) are higher than average of Consumer Cyclicals’ sector.
• Store Sales Decline: In FY24, comparable store sales declined by 2% YoY. However, the Company opened 128 new stores during the period. Notwithstanding, rising costs, such as labor, rents, and marketing, could pressure profitability, especially in markets with higher operating expenses.
• Economic Sensitivity: Lovisa operates in the discretionary retail sector, making it highly sensitive to consumer spending patterns. Economic downturns, rising interest rates, or inflationary pressures can reduce disposable income and demand for fashion jewelry.

LOV Daily Chart

(Source: REFINITIV; Analysis by Kalkine Group)

Valuation Methodology: Price/Cash Flow Approach (FY Jun'25E) (Illustrative)

LOV is expected to trade at a premium compared to its peers considering its 21.2% YoY and 20.9% YoY growth in FY24 EBIT and NPAT, respectively. For conducting the valuation, the following peers have been considered: Beacon Lighting Group Ltd (ASX: BLX), JB Hi-Fi Ltd (ASX: JBH), and A2 Milk Company Ltd (ASX: A2M).

Considering that the stock has crossed its R1 level, market uncertainties, and risks associated, the share price can witness some correction at the current levels. Hence, a ‘Sell’ recommendation is given on the stock at the current market price of AUD 29.88, as of 2 December 2024, at 10:10 AM AEDT.

Markets are trading in a highly volatile zone currently due to certain macro-economic issues and geopolitical issues prevailing geopolitical tensions. Therefore, it is prudent to follow a cautious approach while investing.

Note 1: Past performance is neither an indicator nor a guarantee of future performance.

Note 2: The reference date for all price data, currency, technical indicators, support, and resistance levels is 2 December 2024. The reference data in this report has been partly sourced from REFINITIV.

Note 3: Investment decisions should be made depending on an individual's appetite for upside potential, risks, holding duration, and any previous holdings. An 'Exit' from the stock can be considered if the Target Price mentioned as per the Valuation and or the technical levels provided has been achieved and is subject to the factors discussed above.

Note 4: Dividend Yield may vary as per the stock price movement.

Technical Indicators Defined: -

Support: A level at which the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level at which the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

Stop-loss: In general, it is a level to protect further losses in case of any unfavourable movement in the stock prices.