Berenberg upgraded L'Oréal to Buy from Hold and lifted its 12-month price objective on the shares to €435 from €374, implying about 13% potential upside from the current market level of €385.85. The brokerage cited signs that L'Oréal is entering a phase of renewed acceleration after two years of weaker expansion.
Analysts at Berenberg said the group’s organic growth is reverting toward historical norms as the global beauty market recovers and consumer demand strengthens, with particular momentum among younger shoppers and in emerging markets. The firm expects the overall beauty market to expand by 4% in 2026, following weaker growth across 2024 and 2025, and projects L'Oréal will outpace the sector by roughly two percentage points.
Key drivers identified in the research note include improving conditions in China, sustained strength in skincare and fragrances, and the company’s so-called "Beauty Stimulus" innovation approach. Berenberg suggested these elements should underpin stronger top-line momentum and expanding margins.
Valuation also featured prominently in the upgrade. L'Oréal now trades at about 26 times forward earnings, which the report describes as close to five-year lows and below its long-term average, despite a decade of sharply rising earnings expectations. The brokerage argued that a combination of accelerating growth and a still-discounted multiple could allow the shares to rerate higher.
Beyond operational drivers, Berenberg highlighted strategic optionality tied to the company’s balance sheet. The note forecasts that L'Oréal should become debt-free by 2028. That outcome, the analysts said, would create room for shareholder-friendly moves - including a potential acquisition of Galderma or a buyback of the roughly 20% stake currently held by Nestlé. Berenberg estimated such capital deployment could generate an incremental 10% or more upside for shareholders.
On the topic of Galderma specifically, the report stressed that a full takeover remains speculative but could strengthen L'Oréal’s access to the injectable aesthetics market, a segment the analysts regard as having higher barriers to entry and stronger long-term growth than many conventional beauty categories. Combining the businesses, Berenberg estimated, could lift L'Oréal’s annual organic growth by up to 80 basis points over time, while also warning that an acquisition could initially dilute returns and earnings.
The brokerage’s case blends a recovery in market demand, favourable category mix and potential balance-sheet-enabled transactions. Investors should weigh the projected rerating and optionality against the note’s caveats about speculative deals and the potential for transaction-driven dilution.
Market context and implications
If the scenarios outlined by Berenberg play out, the primary impacts would be seen across consumer discretionary and beauty industry equities, with potential spillover to companies operating in aesthetic medicine should consolidation occur. The projection of a stronger market in 2026 relative to 2024-25 points to improving top-line conditions for brand owners and distributors in key regions, notably emerging markets and China.