How Can L’Oreal’s Digital Investments Help The Company?

LRLCY: L'Oreal logo

A few days ago, L’Oreal announced a partnership with Founders Factory, a global digital and incubator based in London. The exclusive partnership will enable the companies to invest in Beauty tech startups across the world along with the opportunity to co-create two new companies every year. L’Oreal will help the early stage startup companies with product launches while Founders Factory will guide them with their digital strategy. L’Oreal had always been the forerunner for digital initiatives in the beauty industry. The company spends over $1 billion in research and development annually. A few months back, it had released My UV Patch, a skin sensor that gauges UV exposure. The new startups joining L’Oreal’s umbrella through this program can aid in L’Oreal’s market share growth in the Makeup, Haircare, and Skincare segments, which together comprise around 80% of our stock price valuation for L’Oreal.

lrlcy market share kasturipa

If we notice the trend in the table above, L’Oreal has lost market shares for 2014 and 2015 in each of the segments. The digital initiatives coupled with the formation of new companies can help L’Oreal gain back a good portion of these market segments once again. Currently, our future forecast for L’Oreal’s market share gain over 2016 to 2019 is modest given its past trend. However, if L’Oreal is able to gain greater market shares in the coming years, then there can be a significant growth in its stock price valuation. If L’Oreal’s market share in these segments grow at a higher rate to reach ~24% in Makeup, ~20% in Skincare, and ~30% in Haircare by the end of our forecast period, then there can be an over 20% upside to our stock price estimate of L’Oreal.

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1) The purpose of these analyses is to help readers focus on a few important things. We hope such lean communication sparks thinking, and encourages readers to comment and ask questions on the comment section, or email
2) Figures mentioned are approximate values to help our readers remember the key concepts more intuitively. For precise figures, please refer to our complete analysis for L’Oreal