The Market Is Asleep, but Analysts Are Bullish: LVMH, dynaCERT and Mercedes-Benz with Up to 650% Upside

LVMH: From growth stock to value investment

In April 2023, LVMH made stock market history. The luxury goods group became the first European company ever to be worth more than USD 500 billion. Champagne corks likely popped at the company's headquarters on Paris's grand Avenue Montaigne, one of the most important addresses for haute couture and luxury fashion. Little of that remains. The empire of Louis Vuitton, Moët & Chandon, Hennessy, Dior and Tiffany currently has a market capitalisation of just EUR 188.4 billion. Since its record high, the share price has fallen almost 58%. The main reason is China. There, the once eager-to-spend middle class is holding back. 

This is hitting the most profitable division, as the recently published third-quarter figures show. Revenue stood at EUR 18.5 billion. Organically, excluding currency effects, acquisitions and disposals, that is an increase of just 1%. Fashion and leather goods lost 5%. Jewellery and watches performed significantly better, up 6%, as did wines and spirits, also up 6%. Retail operations centred on the Sephora perfumery chain grew the most, at 8%. Regionally, the US, Europe and Japan impressed. At the same time, management is tidying up the portfolio: the Marc Jacobs fashion brand was sold, as was most of the duty-free chain DFS.

One man remains undeterred by the slump: Bernard Arnault. At the end of January, when he presented the 2025 annual results, the group's chief executive announced that his family would own more than half of the capital in the foreseeable future. At the time, he exuded cautious optimism about the operating business. "In 2026, in an environment that remains uncertain, our houses' ability to inspire dreams will once again be a decisive advantage – combined with the utmost vigilance in cost management," Europe's richest man said. He followed his words with action. Between January 28 and February 4 alone, the family bought around 757,000 shares for approximately EUR 407 million. On February 19, the threshold was crossed: since then, the Arnault clan has held just over 50% of the capital and just under 66% of the voting rights. The calculated average price of the February purchases was around EUR 538, a good 40% above today's share price. The turnaround Arnault is hoping for has yet to materialise, and the share price continues to weaken. 

The great growth story has faded for now. In return, the valuation has become moderate. With a price-to-earnings (P/E) ratio of 16 based on 2027 earnings estimates, the shares are cheap by historical standards. The dividend yield of 3.3% expected for this year is attractive. Analysts expect earnings to rise again in the coming years. On average, they set the price target at EUR 498, almost 30% above the current share price of EUR 387.75. The range extends from EUR 415 at Jefferies to EUR 590 at Deutsche Bank and Barclays. The former growth stock is well on its way to becoming a value investment, a solid company with a moderate valuation relative to its market position and pricing power.

dynaCERT: Good news has yet to awaken the shares

The latest success reports from dynaCERT also come from France—these concern diesel engines rather than handbags and champagne. The Canadian company's HydraGEN™ technology is a retrofit solution; it requires no new engine or equipment, so the investment is correspondingly small. The suitcase-sized system generates hydrogen and oxygen during operation and feeds both into the air intake. The effect: fuel burns more completely, consumption falls and, with it, emissions of pollutants and CO₂. This requires neither an additional tank on board nor a network of hydrogen filling stations.

Savings of up to 10% are possible, depending on the unit, engine size and intended use. That may sound modest, but it is anything but: engine manufacturers invest millions to cut consumption by 1 to 2%. During high fuel prices, even that saves millions across large truck fleets. Depending on usage, the cost of retrofitting the HydraGEN™ system can be recouped in less than 2 years. Electrolysis accounts for only around a third of the system. Equally important is the expertise in thermodynamics within the engine and the respective application. The hardware is complemented by the HydraLytica™ telematics platform, which records consumption and emissions. Because Verra has certified the methodology, the Toronto-based company could earn additional revenue from selling carbon credits in the future. At the International Investment Forum (IIF) on October 7, CEO Kevin Unrath provided a comprehensive overview of the company's strategy.

Almost at the same time as the IIF presentation, dynaCERT announced a follow-up order from an existing customer in France, arranged by distribution partner IPMD. Shortly before that, a Dakar Rally racing truck equipped with HydraGEN™ drew attention at the industry gathering 24 Heures Camions in Le Mans. CEO Unrath calls the repeat order "an encouraging sign of continued customer interest following the initial introduction". In Vietnam, a logistics company placed its first series order in June after a successful test phase. In addition, pilot projects are underway at one of the world's largest port operators in the waste management sector and in the oil and gas industry. In parallel, management has launched an international sales drive for heavy-duty transport, ports and stationary power generation. Following the IAA Transportation trade fair in Hanover and TOC Americas in Colombia, Breakbulk Asia in Singapore in November and Powergen International in January are still on the agenda. To make the leap from a research-focused start-up to a series manufacturer, ideally also in the original equipment business, the company must first raise its profile. For this reason, dynaCERT is attending all major industry events.

Unrath, who took over the top job in the spring, set the direction early on: "This is not a fresh start; it is an acceleration". The commercialisation phase is financially secured. In June, dynaCERT raised CAD 5 million through convertible bonds at 6% interest over a two-year term. An older convertible bond of CAD 1 million is to be extended through October 2027. The stock market response has been limited so far. Shares trade around CAD 0.10 and between EUR 0.06 and EUR 0.07 on German trading venues. This puts the market capitalisation at about CAD 50 million – a tiny fraction of the valuation LVMH still commands despite the share price slump. Augsburg-based analyst firm GBC Research recommends a Buy and sets the price target at CAD 0.75 (EUR 0.48), representing more than a sevenfold increase. Will it come to that? The decisive factor will be when pilot projects turn into larger fleet orders. The latest announcements suggest that the wait is drawing to a close.

Mercedes-Benz: Electric Vehicles Offer Hope for the Star

While dynaCERT makes the internal combustion engine more fuel-efficient, any momentum at Mercedes-Benz will likely come primarily from electric powertrains. In the third quarter, the group sold 78,100 all-electric passenger vehicles and vans, 52% more than a year earlier. In Europe, electric passenger car sales rose 78%, and new models are considered sold out here until the end of the year. "Mercedes-Benz Cars has achieved the highest quarterly sales of all-electric vehicles in the company's history", emphasises Mathias Geisen, the board member responsible for sales. The downside: in China, sales slumped by 31% to 86,800 vehicles. Overall, sales fell by 6% to 491,700 units.

Tomorrow, Wednesday, Mercedes will present its third-quarter figures before the market opens. Expectations are low. Analysts expect adjusted operating profit (EBIT) of EUR 1.58 billion, about 25% lower than last year. Margins in the passenger vehicle business are particularly critical. The management board is targeting 3 to 5% for the full year, and has already indicated a figure below this range for the third quarter. UBS considers a reduction in the target to 2 to 4% possible. According to media reports, CEO Ola Källenius wants to cut labour costs in Germany by EUR 800 million.

The valuation reflects the concerns. At a current share price of EUR 41.60, the P/E ratio based on 2027 estimates is just 6.5. The dividend yield is 7.4%, and the group is also buying back its own shares. The analysts' average price target of EUR 57 is almost 40% above the current level. The range extends from EUR 44 at RBC to EUR 70 at Deutsche Bank and JPMorgan. Tomorrow will show whether the star will sink further or Mercedes has the worst behind it.

Conclusion: Plenty of upside, little movement

LVMH, dynaCERT and Mercedes-Benz have one thing in common: analysts see significantly more potential in the shares than the market is currently pricing in. However, the reasons for the restraint differ. LVMH is a quality stock that has lost its growth appeal. For patient investors, the luxury group offers strong brands, a decent dividend and around 30% share price upside. Mercedes-Benz is valued even more cheaply and offers an attractive payout, but it is struggling in China and with weak margins. Tomorrow's figures are likely to set the direction. dynaCERT offers the greatest potential. The technology is winning over its first customers in Europe and Asia, but the share price has not yet reacted. As soon as it announces the leap from pilot projects to larger orders, that is likely to change.