Lovisa shares rally as Morgans sees 'buying opportunity'
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The news: Jewellery retailer Lovisa shares advanced in early trading on the ASX after Morgans analysts said the recent sell-off in the stock provides a buying opportunity for investors.
The numbers: Lovisa shares were up 4.2% to $28.33 by 11:20am AEDT, making it the best performing ASX 200 stock.
Morgans retained its 'add' rating but cut its target price from $36.50 to $36. Citi kept its 'sell' rating on Lovisa and reduced its target price from $25.95 to $25.45.
The context: Morgans noted that the recent weakness in Lovisa's share price is a buying opportunity, after softer-than-expected trading update and the rollout of rival brand Harli + Harpa weighed on the stock in recent days.
Citi analysts said they remain concerned about the quality of Lovisa's new stores, as well as the potential for adverse impacts on sales and margins due to competition from Harli + Harpa.
They also flagged negative impacts following the departure of Lovisa's CEO Victor Herrero and the potential for further management departures, as well as the recent lack of volume growth given consistent price rises.
What they said: "Growth doesn't happen in a straight line and the recent softness in store openings is an example of this," Morgans analysts said.
"... We now forecast 102 net additions this year and [like-for-like sales growth] of 2%, both of which are far from Lovisa's best.
"But none of this means the ultimate prize is any smaller than it was before."
The sources: Citi research, Morgans research
