Lovisa Holdings Ltd (ASX: LOV) shares have been under significant pressure this week.
This follows the release of the fashion jewellery retailer's full year results.
What's going on?
Earlier this week, Lovisa released its FY 2024 results and reported a 17.1% increase in revenue to $699 million. This was driven by the opening of 128 new stores, which offset slightly softer comparable store sales. At the end of the period, Lovisa had a total of 900 stores across 46 markets.
Also growing strongly was the company's net profit after tax. It was up 20.9% $82.4 million, which allowed the Lovisa board to lift its fully franked full year dividend by 26% to 87 cents per share.
While this is arguably one of the strongest results you will see this earnings season, the lack of any firm guidance from management appears to have spooked investors and put pressure on its shares.
After all, this is an ASX stock that has significant growth already priced in. So, any level of uncertainty is unfortunately going to get punished by the market.
Should you buy this beaten down ASX stock?
Analysts at Morgans think that this pullback has created a compelling buying opportunity for investors.
According to a note, the broker has responded to Lovisa's full year results by retaining its add rating with a slightly trimmed price target of $36.50 (from $37.00). Based on its current share price of $31.00, this implies potential upside of almost 18% for investors over the next 12 months.
In addition, the broker is forecasting fully franked dividends of 75 cents per share in FY 2025 and then 82 cents per share in FY 2026. This equates to dividend yields of 2.4% and 2.65%, respectively. This stretches the total potential 12-month return to beyond 20% for buyers at current levels.
Commenting on its bullish view, the broker said:
There are not many global retailers achieving 17% sales growth and 21% EBIT growth in the current challenging consumer environment, but this is exactly what Lovisa did in FY24. A long period of stellar growth has trained investors to have very high expectations for the business and, while its comparable store sales growth should have been better in FY24, it has continued to deliver and will, in our opinion, continue to do so in the years ahead. We maintain our ADD rating.
Overall, this could make Lovisa a beaten-down ASX stock to buy right now.
