We continue to see further signs of slowing momentum and broader equities weakness across both the US and EU, given concerns around AI capex financing as well as headlines about increasing layoffs and potential strain ahead for the consumer.
Seeking tactical downside opportunities, we turn to Essilor Luxottica. Its strong 3Q25 beat has fuelled optimism for smart-glasses sales, yet at a 40x forward P/E, 45% above the 10-year average, investors are likely overlooking medium-term risks. Smart glasses could cannibalise the core business, pressuring margins, while competition accelerates from China and other tech giants. Meaningful daily adoption is also unlikely to emerge soon, and depends on advancements in technology and software. Given the luxury sector has been one of the best-performing sectors over the last 3M (+12% vs. +4% for STOXX), we see short-term risks to the downside.
We see a high probability of the price gap to 280 being filled in the short term and propose Long Dec25 290 puts costing 0.9% of underlying. (Spot ref 310, Fut. ref. 311)