L'Oréal shares rose more than 2% on Wednesday after Jefferies adjusted its valuation assumptions for the cosmetics group, increasing its price target to €328 from €323. Despite the higher target and upgraded earnings forecasts, the broker kept an "underperform" rating, arguing the stock's current multiple assumes a pace of like-for-like growth that recent underlying data does not clearly support.
Jefferies said the price-target increase "reflects higher earnings (+3%), partially offset by an increase in the discount rate (US 10Y yield%)." The broker pointed to L'Oréal's outperformance versus peers in Nielsen scanner data across North America and Europe over the past 12 months and expects the company to grow ahead of its category in the second quarter.
In its modeling, Jefferies projects adjusted like-for-like (LFL) growth of 5.1%, compared with a reported LFL figure of 4.2% and a consensus estimate of 4.8%. The brokerage cautioned, however, that "L'Oréal can remain one of the best growth stories in staples & still be overvalued if the true LFL run rate is c4-4.5%, not the 5%+ investors require from a 26-29x P/E stock."
The firm highlighted two recent corporate transactions that are expected to be accretive to earnings per share. The Kering Beauty acquisition, which closed on March 31, is forecast to add €350 million in annualized sales, with "nearterm dilution to margin & <1% dilution to FY26 EPS."
Jefferies also noted L'Oréal's increased stake in Galderma Group AG, now at 20% following a closing on February 10. That holding will move to equity method accounting, an accounting shift the broker said would add about 3% to earnings per share on a full-year basis.
Geographically, Jefferies emphasized strong scanner-data gains in North America, where tracked sales were up 10% over the last 12 months. Growth leaders in that region included L'Oréal Paris, up 14.4%; La Roche-Posay, up 17.5%; Redken, up 32.8%; and Color Wow, up 27.2%.
In Europe, the broker attributed recent gains primarily to CeraVe, which rose 19.1% over the same period, and Mixa, which increased 27.4%. Jefferies added that Mixa is "enjoying share gains at the expense of other mass brands like Nivea."
Turning to China, Jefferies said government data "supports a stronger growth outlook" for the broader beauty category and observed that L'Oréal "is gaining share in the online channel" ahead of the 6/18 sales festival.
On the numbers, Jefferies raised its revenue forecasts to €46.69 billion for 2026 and €49.14 billion for 2027. The broker also increased its earnings-per-share estimates to €13.84 for 2026 and €14.72 for 2027.
While the updated forecasts and the expected benefit from recent transactions underpin the higher price target, Jefferies' retained underperform rating underscores its view that L'Oréal's market valuation still implies a sustained LFL growth profile above what the firm considers the most likely run rate.