L’Oreal S.A. (OTCPK:LRLCY) experienced a decline in trading on Tuesday in Paris, following Deutsche Bank’s issuance of a Catalyst Call Sell recommendation on the renowned cosmetics stock.
According to analyst Tom Sykes, the short-term investment idea is primarily based on the bank’s analysis of China’s import data, which suggests a much more limited growth in usage than what the market anticipates. Sykes emphasized that the growth in the value of China’s beauty imports over the past four years has been predominantly driven by premiumization rather than a substantial increase in import quantities. Furthermore, he highlighted the stock’s valuation being adversely affected by the imbalanced relationship between price and usage rates.
Sykes explained, China’s beauty imports, in terms of value, have experienced a significant year-on-year decline, indicating potential downward risks in sales trends. We anticipate that Hainan still maintains excess inventory. While data from the United States remains robust, we have reached unemployment levels historically associated with the peak of beauty growth in the country.
In 2022, L’Oréal (OTCPK:LRLCY) held the title of the world’s largest beauty and cosmetics company based on sales volume.
During early afternoon trading in Paris, shares of L’Oréal (OTCPK:LRLCY) witnessed a decline of 1.55%.
Featured Image: Unsplash @ Muhammad Tayyab
Author Faith Yakubu 
