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L'Oréal S.A. (OTCPK:LRLCY) traded lower in Paris on Tuesday after Deutsche Bank issued a Catalyst Call Sell Idea on the cosmetics stock.
Analyst Tom Sykes said the basis for the short-term investment idea is that the firm's analysis of China import data suggests much more limited usage growth than we think the market is expecting. He noted that value growth in China beauty imports over the last four years was all related to premiumization, rather than a higher weight of imports. He also said the weaker balance of price in comparison to usage rates is a headwind to the stock's valuation.
"China beauty imports by value are meaningfully negative year on year, implying downside risk to sell in trends. We expect Hainan is still overstocked. US data is still robust but we are now at unemployment levels where US beauty growth has historically peaked."
L'Oréal (OTCPK:LRLCY) was the largest beauty and cosmetics company in the world in 2022 by sales.
Shares of L'Oréal (OTCPK:LRLCY) were down 1.55% in early afternoon trading in Paris.