The LVMH share price has been in a strong uptrend in the past few months as concerns about its Chinese business eased. It jumped to a high of €630, its highest level since March and 45% above its lowest level this year.
LVMH is betting on China’s recovery
There are signs that LVMH’s Chinese business is coming back to life after going through a rough patch in the past few years. According to Bloomberg, the company is planning to open large stores in the country by December this year.
It will open stores of its brands like Louis Vuitton, Dio, Tiffany, and Loro Piana. The company is also working on opening a new Christian Dior store in Shanghai.
These new developments are a bet that the company’s business in the country is improving. Besides, the most recent results showed that its Chinese business returned to growth. Similarly, Kering, the parent company of Gucci, reported a smaller-than-expected sales decline in the country.
A recovery in the Chinese market will be a good thing for companies like LVMH as Europe and the United States slow. The most recent results showed that its wines and spirits revenue slowed by 4% in the first nine months of the year to €3.97 billion.
Its fashion and leather goods revenue softened to €27 billion, while its selective retailing and watches & jewelry have rebounded modestly in the same period.
The luxury industry has other catalysts, including the ongoing economic recovery in key markets. Most notably, the stock market has continued doing well in the past few months, with top indices in the US, Europe, and Asia rising to a record high.
Another catalyst is that the company is reasonably valued, with a price-to-earnings ratio of 26, slightly higher than the S&P 500 Index average of 22.
LVMH share price technical analysis
The daily chart shows that the LVMH stock price has been in a strong uptrend in the past few months. It has moved from a low of €434 in July to the current €630, its highest level since March 10.
The stock is now hovering at the 61.8% Fibonacci Retracement level. Also, it has moved above the Ichimoku cloud and the Supertrend indicators, a sign that bulls are in control.
The LVMH share price has formed a golden cross pattern as the Relative Strength Index (RSI) and the MACD have all moved upwards. It has also moved to the ultimate resistance level of the Murrey Math Lines tool.
Therefore, the most likely scenario is where the stock continues rising, with the next key level to watch being at €750, the highest level in January this year.
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