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Why the Lovisa (ASX:LOV) share price may be sparkling

The Lovisa Holdings Ltd (ASX: LOV) share price is glittering today. It is currently up more than 4%.

Lovisa is a global retailer of affordable jewellery. It has store networks across the world in the UK, Europe, the USA, the Middle East, Asia, South Africa and ANZ.

Why the Lovisa share price may be rising

Share brokers often provide their thoughts about different businesses that they think are opportunities, or perhaps they believe have run too hard.

One of the brokers that provide comments is Macquarie Group Ltd (ASX: MQG).

Reporting by the Australian Financial Review noted that Macquarie has increased what it thinks Lovisa is worth, or is going to be worth. A price target is the broker’s thought about where the (Lovisa) share price will be in 12 months from when it made the call on the business.

Price target and opinion

Macquarie now thinks that Lovisa can rise to $25, up from the previous price target of $17.

The analysts are positive on the new CEO, Victor Herrero. It was noted that he has done a good job at Inditex and Guess to grow the brand and store network. China and India were too regions of previous geographic success.

Macquarie pointed out that the combined China and India jewellery market is bigger than the US by around 15%.

The AFR quoted the Macquarie opinion, talking about how large the opportunity is:

“We understand the total addressable market size for Europe is smaller than the US based on the relative number of potential sites, suggesting China and India also collectively exceed this market.

“We are confident in Lovisa successfully managing pricing, language, product and competition should expansion into China and India come to fruition. Furthermore, while the strategy for Lovisa will only be fully understood in time, we consider the ability for international retailers to command higher price points in these markets relative to home markets as being supportive for the strategy.”

Macquarie believes that Lovisa could reach around 1,400 or more potential sites in India and China alone.

Summary thoughts on the Lovisa share price

Over just the last six months, Lovisa shares have risen by around 70% to more than $22. Macquarie’s price target is not exactly a huge jump for the next 12 months. But Lovisa’s profit still needs to go through the recovery.

I think that Lovisa is a compelling business and has plenty of growth potential, particularly if it can do well in India and China. In my opinion, it’s one of the smaller ASX growth shares worth watching with how profitable its stores can be.

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