(Paris) The market capitalization of the world’s leading luxury goods company LVMH exceeded the threshold of 400 billion euros ($578 billion) on Tuesday, a first for a European company, but which is still no match for the American giants.
The milestone of 400 billion euros (LVMH is worth 430 billion dollars) is symbolic, but constitutes an all the more impressive record for a European company as the luxury group is the only company of the Old Continent to be among the 20 most global large caps.
The capitalization of a company designates the amount that would have to be spent to buy all of the existing shares.
Of the top 100 valuations, 61 are American, according to a census carried out by the firm EY at the end of December 2022. France, Switzerland and the United Kingdom are represented by 12 companies in this list. The firm does not include any German company, the chemical group Linde having announced in October its desire to leave the Dax (main German stock market index) to be listed only in the United States.
Only 15 companies from China, yet the world’s second largest economy, make it into this ranking, a low figure due to a lack of investor confidence in Chinese assets, particularly subject to government interference.
In addition to the Swiss agrifood giant Nestlé, from which LVMH took over the position of the largest European capitalization during the second half of 2022, several companies in the health sector occupy the top of the European basket: Novo Nordisk, Roche, AstraZeneca , Novartis. Some are still benefiting from a “COVID-19 effect”.
In its study, EY notes that “the importance of Europe in global stock markets has been declining for years”, pointing out that before the 2008 financial crisis, “46 of the 100 most valuable companies in the world were European , there are currently only 15”.
Giant crushers
European companies pale in comparison to the American giants Apple (2120 billion dollars), Microsoft (1750 billion), the parent company of Google, Alphabet (1190 billion) or Amazon (970 billion).
A valuation gap which is mainly explained by the size of the companies: LVMH garnered 64 billion euros in revenue in 2021, while Apple’s turnover approached 400 billion dollars for its staggered 2021 financial year. /2022.
The attractiveness of Wall Street, where “the full spectrum of international investors is accessible”, also plays a role, according to Christopher Dembik, director of macroeconomic research at Saxo Bank. “There are more flows oriented towards the American market”.
An observation not entirely shared by Michael Green of Simplify Asset Management who underlines that “on the whole, the markets are global today” and that, proportionally to income, “the valuation differences between Europe and the United States have largely reduced and disappeared. »
The frequency and larger volumes of share buyback programs in the United States, which support stock prices, are also to be taken into account for Michael Hewson, analyst at CMC Markets.
“King of the Jungle”
“There is also a phenomenon of mimicry by asset managers who systematically have a fairly large exposure to the American market”, the percentage of American assets in a portfolio “can go up to 30% to 50%, including at European managers”, assures Christopher Dembik.
For him, the only European sector that can claim to catch up with American capitalizations is luxury, with “resilience, regardless of the nature of the crisis” and “phenomenal stock market increases over the past ten years”.
Since 2020, the LVMH share has been driven by government and central bank measures to help the economy, by the increase in its sales despite soaring prices and, more recently, by the economic reopening of China.
Its price reached 803.20 euros in session on Tuesday, a record, to end at 797.40 euros. This represents an increase of nearly 50% from its 2022 low, reached in early June. Since the beginning of 2023, it has already soared by 17.28%.
For Luca Solca, Bernstein analyst specializing in luxury, LVMH’s progress “shows that luxury is one of the rare sectors where Europe is the leader”. And “LVMH is increasingly the king of the jungle,” he adds.