Why is EssilorLuxottica's stock price declining?

Investing.com - EssilorLuxottica SA (EPA:ESLX) stock faces pressure as investors grow increasingly concerned about the rising competitive risks brought by tech giants entering the smart glasses market. Bernstein analysts warn that AI-driven eyewear products are intensifying industry disruption.

In a research report on Wednesday, Bernstein stated that as rumors about Apple potentially launching smart glasses heat up, the valuation of the Ray-Ban owner continues to be compressed, heightening investor concerns about the long-term prospects of traditional eyewear manufacturers.

The brokerage maintained a “market perform” rating and a target price of €250, suggesting that competition from tech companies like Apple, Google, Samsung, and Alibaba could reshape the industry landscape.

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Bernstein indicated that the emergence of smart glasses poses a “fundamental threat” to EssilorLuxottica’s business model, as consumer tech companies are heavily investing in establishing new supply chains and may bypass existing eyewear brands.

Bernstein added that shifting toward a wholesale distribution model could impact store productivity while increasing the risk of direct retail competition from tech companies, further reinforcing investor caution regarding the company’s growth prospects.

The firm believes that even if smart glasses do not become the “next smartphone,” their structural impact on the traditional eyewear market could be lasting, as new suppliers and competitors are emerging across the entire value chain.

In addition to competitive pressures, the brokerage also highlighted operational concerns following the company’s full-year earnings release for fiscal 2025. Analysts pointed out that profit margin dilution is occurring faster than expected, partly due to the push into wholesale channels and the retail erosion risk faced by EssilorLuxottica’s approximately 18,000-store network.

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