The global luxury market is set to reach $1.5 trillion by the end of 2023. Consumer behavior reveals a predilection for lavish products, even against an uncertain financial backdrop. Indeed, despite economic uncertainties, demand persists for luxury goods. This presents well for aspirational and opulent wares purveyors and allows investors to buy profitable luxury stocks. Here, we highlight three public companies in the luxury segment set for growth. These enterprises have cultivated expertise in rendering luxury commodities into robust earnings through boom and bust cycles alike.
Ferrari N.V. (RACE)
One of the best luxury stocks on our list has grown from a niche sports car manufacturer into a diversified luxury brand, Ferrari N.V. (NYSE:RACE). The company was founded in 1947 in Maranello, Italy, and now has a market cap of $60.5 billion. As we know, Ferrari produces various luxury performance vehicles, including limited-edition supercars and track offerings. RACE has expanded beyond auto manufacturing in recent decades. The company now operates Ferrari museums and restaurants, builds theme parks, provides financial services to clients, manages racetracks, develops apparel and accessories and licenses the Ferrari brand to other luxury goods producers.
Ferrari has announced plans to launch its 2024 Formula 1 race car, which the company states will be 95% new compared to its current vehicle. The launch aims to position Ferrari to be competitive in Formula 1 racing in the future. The company may also generate further interest from racing fans and investors by introducing an updated vehicle.
Ferrari reported solid financials for the third quarter. The company made €1.544 billion or ($1,690 billion USD$) in revenue and sold 3,459 cars in total, an 8.5% increase YoY. Ferrari reported excellent profits—its adjusted EBIT grew 41.6% to €423 million ($463.3 million). Analysts rate RACE as a Buy with a high price target of $456, representing a ~34% upside for investors.
Moët Hennessy Louis Vuitton (LVMHF)
The second luxury stock on our list is a global luxury goods company established in 1854 and headquartered in Paris, France, LVMH Moët Hennessy Louis Vuitton (OTCMKTS:LVMHF). The company has an aproximate enterprise value of over $400 billion. It operates a portfolio of luxury brands across multiple product categories, including wines and spirits, fashion and leather goods, perfumes and cosmetics, watches, and jewelry. Among its key brands are Dom Pérignon, Louis Vuitton and Sephora.
LVMHF has a worldwide retail presence across 5,664 stores. Furthermore, the company has ventured into media, hospitality and leisure through holdings in Les Échos, Belmond and Jardin d’Acclimatation.
LVMH Moët Hennessy Louis Vuitton announced plans to hold its next Louis Vuitton Voyager Show in Shanghai in April 2024, highlighting off-season collections in various global locations. The event continues LVMHF’s long-running efforts in China, where Louis Vuitton opened its first store in 1992. Industry observers note that staging events in China allows LVMH to strengthen engagement with Chinese consumers, an important consumer base in the luxury goods market.
LVMHF reported strong organic revenue growth of 9% in the third quarter compared to last year, with all business segments showing growth except for Wines & Spirits, which faced a high basis of comparison. The main growth drivers were Fashion and Leather Goods (up 9%), Perfumes & Cosmetics (9%), and Selective Retailing (26%). Double-digit organic growth was achieved in Europe, Japan and the rest of Asia. This excellent and consistent growth across most of its product segments makes a great case for why LVMHF is one of the best luxury stocks to buy right now.
Tesla (TSLA)
The last luxury stock on our list is a pioneer in electric transportation and renewable energy solutions led by Elon Musk, Tesla, Inc. (NASDAQ:TSLA). The company was originally founded in 2003 as Tesla Motors but changed its name to simply Tesla, Inc. in 2017. The company is headquartered in Austin, Texas, and has grown significantly over the past two decades to reach a market cap of over $813 billion.
Today, Tesla continues to operate in the automotive and energy generation/storage segments. The company manufactures electric vehicles in the luxury category, along with solar energy systems and energy storage solutions. Tesla sells its automotive and energy products directly to individual consumers and commercial or utility ones worldwide.
Volkswagen, Porsche and Audi recently announced plans to incorporate Tesla’s EV charging plug into some models. This potentially expands accessibility to Tesla’s charging network for drivers of these other automakers.
TSLA reported strong third-quarter results with $23.4 billion in total revenue, up 9% year-over-year. Notably, GAAP net income reached $1.9 billion. Additionally, the company generated robust cash flow with $3.3 billion in operating cash flow and $0.8 billion in free cash flow. Performance was fueled by progress in reducing costs, with costs per vehicle decreasing to around $37,500. Diversification into business lines like Energy Generation and Storage contributed to gross profit. That said, EPS did miss estimates by 17.19%. Despite that, analysts still rate Tesla as a Buy with the highest target of $380. This represents over 47% upside potential for investors, making it a good addition to any luxury stocks to buy list.
On the date of publication, Rick Orford held long positions in LVMHF and TSLA. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
