RBC Capital Markets has trimmed its 2026 growth outlook for EssilorLuxottica, the world's largest eyewear company, after the maker of Ray-Ban and Oakley sunglasses reported second-quarter revenue that came in slightly below expectations. The Canadian investment bank cut its forecast for organic growth next year to 8.8% from 10.5%, while keeping its price target on the stock at €230.
The move reflects a nuanced read on the company's latest results. RBC described the miss as “small” and attributed it to a softer-than-expected contribution from EssilorLuxottica's AI-powered smartglasses, rather than any weakness in its core prescription lenses and traditional eyewear lines. That distinction matters, because it suggests the underlying business remains healthy even as the company's newer tech-driven products take time to ramp up.
Why the smartglasses miss matters
EssilorLuxottica has been betting big on smartglasses, particularly its partnership with Meta to produce Ray-Ban Stories and other connected eyewear. These products are higher-margin than standard frames and lenses, and they represent a potential growth engine as the company looks beyond its traditional markets. But they are also newer and more volatile, with sales that can swing sharply from quarter to quarter.
RBC's logic is that the second-quarter shortfall is almost a best-case scenario for investors. Because the miss came from smartglasses rather than the core business, it resets expectations from a lower base. That could make it easier for the company to beat comparisons later in 2026, especially if competing AI glasses from other tech firms hit the market and intensify competition. In other words, the bank sees the current weakness as a temporary blip, not a sign of structural trouble.
The broader context is that AI wearables are still a nascent category. While products like the Ray-Ban Meta glasses have generated buzz, they remain a small slice of EssilorLuxottica's overall revenue. The company's traditional eyewear business—lenses, frames, and sunglasses—still drives the vast majority of sales and profits. That gives the company a stable foundation while it experiments with new technology.
What it means for investors
For everyday investors, the key takeaway is that analysts are adjusting their models to reflect a slower ramp for smartglasses, but they are not abandoning the stock. Keeping the €230 price target suggests RBC still sees meaningful upside from current levels, even after the forecast cut. The target implies a belief that the company's long-term growth story remains intact.
However, the revision is a reminder that growth estimates can change quickly, especially for companies with exposure to emerging tech trends. Investors should watch how EssilorLuxottica's smartglasses sales evolve in the coming quarters, and whether rivals like Apple or Google introduce competing products that could pressure margins. The company's ability to defend its premium pricing in eyewear will also be crucial.
RBC's move comes amid a mixed picture for global markets. While some sectors, like AI-driven tech stocks have been surging, consumer goods companies face headwinds from inflation and shifting spending patterns. EssilorLuxottica's core business has been resilient, but the smartglasses miss shows that even well-positioned companies can stumble on execution.
Investors should also note that EssilorLuxottica is a European-listed stock, so currency fluctuations can affect returns for U.S.-based investors. The euro's strength or weakness against the dollar will play a role in how the stock performs in dollar terms.
Looking ahead
The next major catalyst for EssilorLuxottica will be its full-year results and any guidance for 2026. If smartglasses sales pick up in the second half, the company could easily beat the lowered expectations. Conversely, if the weakness persists, further forecast cuts could follow.
For now, RBC's stance is cautiously optimistic. The bank's decision to keep the price target unchanged signals that it views the miss as a timing issue, not a fundamental problem. That aligns with the broader market narrative that AI wearables are a long-term opportunity, even if the path is not always smooth.
As always, investors should do their own research and consider how EssilorLuxottica fits into their overall portfolio. The stock offers exposure to both consumer staples and cutting-edge technology, but it comes with risks tied to fashion trends, competition, and the pace of AI adoption.
