UBS Upgrades L’Oréal to Buy, Sees Strong Sales Momentum and 20% Upside

UBS has upgraded L’Oréal SA (EPA: OREP) to a “buy” rating from “neutral,” citing accelerating sales momentum, improving market share trends, and a reduced risk profile for the world’s largest cosmetics company. The brokerage also raised its price target to €430, implying roughly 20% total shareholder return from the stock’s January 8, 2026 close of €358.20.

The upgrade represents a clear shift in UBS’s stance after more than two years of relatively subdued growth for L’Oréal. According to analysts, a rare alignment of favorable factors is emerging, driven primarily by stronger demand in the United States and China, improved market share gains, and a more balanced growth mix across regions and product categories.

UBS now expects like-for-like sales growth of 6.4% in the fourth quarter of 2025 and 5.8% in 2026, outperforming market consensus forecasts of 6.1% and 5.1%, respectively. On an adjusted basis, excluding a 110-basis-point boost from the company’s IT transformation program, fourth-quarter growth is projected at 5.3%. Analysts noted that after 15 months of below-average like-for-like growth, sales momentum is set to meaningfully improve in 2026.

The broader global beauty market expanded by around 3.5% in 2025, below its long-term average of 4.3%, but growth accelerated through the year, supported mainly by the U.S. and China. UBS estimates L’Oréal’s market outperformance strengthened from 1.1 times in the first half of 2025 to 1.3 times in the second half, a level expected to continue in 2026 as product launches and marketing investments increase under the group’s “beauty stimulus” strategy.

Nielsen data shows L’Oréal achieving four consecutive months of strong U.S. market share gains, while Europe recorded five straight months of improvement through November 2025. UBS also highlighted reduced risks, pointing to clearer capital allocation following L’Oréal’s decision to cap its Galderma stake at 20% and declining dependence on fragrances for growth.

From a valuation perspective, L’Oréal trades at 26.5 times projected 2026 earnings, around 20% below its five-year average. UBS forecasts adjusted EPS of €13.57 in 2026, operating margins of 20.5%, and believes its €430 target, based on a discounted cash flow model, still leaves room for upside.