EssilorLuxottica Shares Drop After Goldman Sachs Downgrades on AI Glasses Growth Concerns

EssilorLuxottica SA (ESLX) saw its shares slide more than 3% on Tuesday, bucking the otherwise modestly positive trend in European markets. The catalyst? A downgrade from Goldman Sachs that shifted the investor sentiment from Buy to Neutral.

Goldman Sachs lowered its 12-month price target from €230 to €200, pointing out that the rapid growth fuelled by the company's AI-driven eyewear might be losing steam. In particular, analyst warnings note tougher year-over-year comparisons and increased competition are clouds on the horizon for the smart glasses segment.

The bank trimmed its long-term revenue growth prediction for EssilorLuxottica to about 7.9% annually for 2026 through 2028, down from their previous 8.9%, and beneath the consensus market estimate of 9.5%. That adjustment reflects a notable tempering of optimism around the firm's top-line expansion.

AI-enabled glasses have been the powerhouse behind EssilorLuxottica's recent momentum. However, Goldman Sachs cautioned that replicating blockbuster product launches, which jump-started growth so far, could become more difficult. Throw into the mix upcoming smart glasses from tech heavyweights like Google, Samsung, and Apple, and it's clear competitive pressures are intensifying.

An added twist relates to the recent debut of more affordable smart glasses by Meta. Goldman suggests this might shift EssilorLuxottica's role in the AI glasses ecosystem, repositioning it more as a supplier of lenses and a distributor instead of a primary frame manufacturer. This pivot could boost profit margins over time but might also temper reported revenue growth in the near term.

Despite the downgrade, Goldman didn't dismiss the AI eyewear market outright. Demand remains robust and the category is expected to grow, but the brokerage urged caution given the rapid acceleration witnessed in the last year. Investors' expectations could be outpacing the realistic pace of expansion.

EssilorLuxottica's stock ended the day down 3.3% at €163.75, underperforming the STOXX 600's 0.7% dip. It reflects how sharply the market reacted to the shift in growth outlook and competitive dynamics in the booming AI glasses segment.

The downgraded rating and adjusted forecasts suggest a more challenging road ahead as the AI glasses arena matures. It'll be interesting to see if EssilorLuxottica can hold its lead against newcomers wielding deep pockets and tech muscle. Time will tell whether the company's strategy pivots can offset the hurdles on the horizon.