Jefferies has moved L'Oreal up to a Hold rating from Underperform and lifted its 12-month price target to €377 from €328, citing improving underlying growth dynamics revealed in the company's first-half results.
The stock responded positively in early Paris trade, rising 1.2% by 10:28 GMT.
Analysts led by Molly Wylenzek said recent data are weighing against their prior assumption that L'Oreal's two-year compound annual growth rate would remain trapped in a 4-4.5% range. Second-quarter results came in above that band, the team said, aided by a more supportive market backdrop.
Jefferies characterised the quarter as a "clean (girl) beat," noting outperformance across nearly all divisions and regions. Gross margin expansion, the analysts wrote, was largely a function of a more favourable sales mix, while the company funded innovation investment by securing savings within selling, general and administrative expenses.
The firm pointed to a firming underlying beauty market, estimating that growth is now around 5%, versus the low-4% range seen earlier in the year. Jefferies singled out China’s recovery as particularly important, saying multinationals including L'Oreal are beginning to regain share after several years of pressure from local competitors.
Despite what the analysts described as ongoing structural challenges in the beauty sector, they argued L'Oreal is well positioned. The firm's scale, R&D depth, multi-brand portfolio and broad distribution network were cited as assets. Jefferies said the multi-brand approach supports a "pricing ladder strategy" as consumers trade up and down, and that channel breadth is "a strength in negotiating and testing/learning" while consumer habits evolve.
To reduce the noise of quarterly swings, Jefferies continues to view L'Oreal through a two-year lens. Using that framework, the group's underlying like-for-like growth had been running at about 4.5% over the previous four quarters but has now accelerated above 5%.
On that basis the analysts said they believe L'Oreal is "capable of the c5.5% growth delivery that comes with higher valuation - and of course remains one of the best in class for staples." On valuation, Jefferies added: "At current levels, we think valuation broadly reflects our medium-term expectations." The firm concluded that "a premium is justified, but at 27x, L'Oreal is premium enough."
The upgrade and higher price target reflect Jefferies' shift in view following the quarter's broad-based performance, margin benefits from mix, more disciplined funding of innovation, and signs of improving end-market conditions, with particular emphasis on China as a recovery catalyst for multinationals.