Luxury behemoth Louis Vuitton Moet Hennessy is up 13% today after surprising the market with positive third quarter organic growth. It’s been a difficult few years for the company, however, whose stock is trading at 2021 levels as sales stagnated after the pandemic boom. Even after today’s jump, LVMH shares are still down by a third from the 2023 record. But a look at the structure of the recent decline indicates that the bulls may be serious this time.
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The daily chart above reveals a complete A-B-C zigzag correction, where wave A is a leading diagonal, while wave C is a five-wave impulse. Both are marked 1-2-3-4-5 and interrupted by a three-wave recovery in wave B in between. According to the Elliott Wave theory, once a correction is over the preceding trend resumes. Since LVMH was clearly in an uptrend prior to this retracement, it makes sense to expect more gains going forward.
If this count is correct, we can expect new all-time records in coming quarters, which translates into upside of at least 50% from the current price of ~€600 per share. While the stock is a bit expensive for our taste on a P/E basis, we’ve already seen how this pattern plays out and the bulls would love it.
We shared this chart of the SP500 with our Pro subscribers on September 28th, 2022. It revealed that the bear market, which unfolded that year, took the shape of the same A-B-C zigzag. Wave A was, again, a leading diagonal, followed by an a-b-c to the upside in wave B, before a five-wave impulse completed the structure in wave C. Soon after we published this, the index bottomed just under 3500 and has so far almost doubled in the three years since.
Now, it would take a notable sales growth acceleration at LVMH for the stock to double to €1200. The odds are good, though, given the similarity between its stock pattern and the one, which put the S&P 500 on the path to over 6000.
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