Kepler raises EssilorLuxottica rating, highlighting smart glasses opportunity

Investing.com - EssilorLuxottica’s smart glasses represent a big enough opportunity to justify peak valuations of the stock, analysts at Kepler Cheuvreux argued in a note raising their rating of the company to "buy" from "hold."

The analysts including Niccolo Guido Storer predicted that sales of EssilorLuxottica’s smart glasses could touch as much as 55 million units per year. Sales have surged in the high double digits for the past five years.

They added that, following a sputtering early roll out the glasses, EssilorLuxottica has gained traction with an artificial intelligence-enhanced version of its Ray-Ban brand, which is made in conjunction with Facebook-owner Meta.

Earlier this week, Bloomberg News reported that Meta and EssilorLuxottica are now mulling doubling the output of the smart glasses, which feature artificial intelligence capabilities, to 20 million units by the end of 2026.

Roughly 2 million units were sold in 2024 and are expected to accelerate to about 6.5 million in 2025, an uptick that the analysts argued signals "a clear inflection point in category adoption."

"The equity market began to price in the smart-glasses opportunity from late 2024 as evidence of this shift mounted, propelling the stock to record valuation levels," they wrote.

EssilorLuxottica’s smart glasses business is now projected to amount to nearly 60 billion euros. Folded in with the value of its legacy glasses unit, the firm’s total equity value is around 160 billion euros, or 350 euros a share, the analysts said.

Against this backdrop, they raised their price target for EssilorLuxottica shares to 350 euros from 248 euros. Paris-listed shares of EssilorLuxottica were last trading at 281.20 euros on Thursday.

"Despite the potential risks of cannibalization and rising competition, EssilorLuxottica’s nearly five-year first-mover advantage, combined with its strong brands, vertical integration, and global distribution, should allow it to defend its positioning and remain a structural winner in the category," the Kepler analysts said.

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