June has certainly not started well for S&P/ASX 200 Index (ASX: XJO) darling Lovisa Holdings Ltd (ASX: LOV).
At market close last Friday, 31 May, shares in the ASX 200 fashion jewellery retailer closed trading for $33.91 apiece.
That put the Lovisa share price up more than 64% in only 12 months. Atop that supersized share price gain, Lovisa also paid out 81 cents per share in partly franked dividends over the year. This sees the stock currently trading on a trailing yield of 2.8%.
But things took a turn for the worse yesterday, with the Lovisa share price crashing 10.4% to close at $30.40.
And the selling continues today, albeit at a more modest pace.
In afternoon trade on Tuesday, the Lovisa share price is down 3.1% at $29.45, putting the stock down 13.2% since Friday's closing bell.
I told you June was off to a rough start!
However, longer-term shareholders should still be sitting on some outsized gains.
Despite the fire sale, shares in the ASX 200 retailer remain up 42.7% over 12 months.
Why is the Lovisa share price getting smashed?
ASX 200 investors were overheating their sell buttons yesterday after Lovisa announced that CEO Victor Herrero will be stepping down on 31 May next year.
Herrero will be replaced by John Cheston, currently the CEO of Smiggle.
"John is a highly successful global retailer and will join Lovisa at a very exciting time as we continue our global growth," Lovisa chairman Brett Blundy said.
Clearly, though, investors have their doubts.
"The outgoing CEO has been instrumental in Lovisa's global expansion," Motley Fool analyst James Mickleboro noted.
Mickleboro added:
While a lot of the hard work has certainly been done since his [Herrero's] arrival in 2021, there's still a lot more to come. The market may be concerned that his exit now puts at risk the successful execution of this expansion.
Which brings us back to our headline question.
Time to pounce on this ASX 200 superstar?
Following Lovisa's announcement yesterday, a number of brokers downgraded their outlook for the ASX 200 jewellery retailer.
Among them:
- Barrenjoey cut Lovisa to a neutral rating with a $29.80 price target
- Citi cut Lovisa to a neutral rating with a $31.65 price target
- Morgan Stanley cut Lovisa to an equal-weight rating with a $30.25 price target
- Canaccord cut Lovisa to a hold rating with a $29.00 price target
Now, what you might have noticed is that while the ASX 200 company was broadly downgraded following the past two days of selling, the price targets from three of these brokers are already higher than the current $29.45 a share.
Indeed, Citi is forecasting a potential upside of 7.5% from current levels.
Atop these brokers, Wilsons Advisory analyst Tom Camilleri also expressed concern over Lovisa's ongoing growth, particularly in China where Herrero has experience with store roll-outs.
In its half-year results for the six months to 31 December, Lovisa reported opening 74 outlets during the half year, taking the total to 854. That included the company's first store in Guangzhou, China, and Ho Chi Minh City, Vietnam.
As for the outlook for the ASX 200 retail stock going forward, Camilleri added:
On a more fundamental level, Lovisa still has one of the most profitable and scalable physical retail formats globally, which should continue to be rewarded with a premium multiple.
And keeping in mind that Lovisa's last interim dividend of 50 cents per share marked an all-time high payout, I'd say the two-day 13% sell-down could present a great opportunity to get in at an attractive long-term price.
