Lovisa Holdings Ltd (ASX: LOV) shares have more than doubled since April.
Those who bought the 'Liberation Day' dip have been well rewarded.
After hitting a 52-week low of $20.23 in early April, Lovisa surged to reach a 52-week high of $43.68 last week.
What has prompted this rebound? Let's find out.
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Lovisa delivers impressive FY25 results
Last Thursday, Lovisa unveiled its FY25 results. The market reacted positively, with Lovisa shares ending 14% higher that day.
Lovisa posted a 14.2% increase in revenue to $798.1 million and a 4.8% lift in net profit after tax to $86.3 million.
After opening 162 new stores in FY25, Lovisa ended the period with 1,031 total stores, up from 900 a year ago. The US, Canada, and Europe were the key markets, with 127 new stores, including 7 of its new upmarket Jewells brand in the UK.
This momentum has continued into FY26. For the first 8 weeks of the new financial year, management revealed that same-store sales had increased 5.6%, while total sales had lifted by 28%.
Key competitor shuts shop
While the fast fashion jewellery industry is highly fragmented, Lovisa faces a few major competitors.
In early August, it was revealed that one of its major competitors, Claire's, had filed for bankruptcy. This provides a chance for Lovisa to capture further market share.
According to the Australian Financial Review, Claire's, which has over 2300 stores, was set to close about 700 locations in the US until last week. However, private equity firm Ames Watson has bought the North American part of the business. It has been reported that Claire's will still close several hundred stores in the US.
Lovisa's valuation
It's clear that Lovisa currently has significant momentum behind it. However, its share price has more than doubled in just a few months.
Therefore, investors may be wondering whether its valuation is still attractive.
After reviewing the result, Macquarie Group (ASX: MQG) provided its view in a 28 August research note.
The broker was mostly impressed by what it saw, and commented that Lovisa had started FY26 on a particularly strong note.
Macquarie found it 'interesting' that Lovisa has successfully implemented modest price increases in the Americas to combat the current tariff situation, with no consumer price resistance.
The broker also commented on changing competition dynamics. Macquarie noted that the downfall of Claire's could create a market share gap for Lovisa to fill. However, domestic competition would likely increase following the entry of Harli + Harper in the market.
Macquarie increased its price target by 22% to $40.20. However, given that shares are already trading above this, Macquarie downgraded its rating from 'overweight' to 'neutral'.
The broker said:
Downgrade to Neutral. We see risk/reward symmetry as equally weighted at current share-price levels – with store rollout + easing competition overseas balanced by increasing competitive intensity in ANZ.
Foolish Takeaway
Lovisa shares have soared more than 100% since their Liberation Day slump. Those who bought in the April dip have been well rewarded for backing the fashion jewellery retailer. However, for those looking to buy today, broker Macquarie suggests Lovisa shares are fully valued, and that prospective investors should wait for a more attractive entry point.
