BofA Securities resumes Estee Lauder stock with Buy rating on recovery plan

Investing.com - BofA Securities has reinstated coverage on Estee Lauder (NYSE:EL) with a Buy rating and a $110.00 price target, suggesting 30% upside potential from the current price of $86.61 for the cosmetics giant.

The research firm’s analysis centers on Estee Lauder’s position as the second-largest player in the $160 billion global prestige beauty market. The company maintains impressive gross profit margins of 74% while generating $14.8 billion in revenue across 25 brands including Estee Lauder, Clinique, M•A•C and La Mer.

BofA Securities notes that Asia has been a significant drag on the company’s profitability, contributing to an 80% decline in earnings per share from peak to trough levels.

The firm expresses confidence in Estee Lauder’s "Beauty Reimagined" recovery plan, forecasting a 4% revenue compound annual growth rate with high incremental margin improvements.

BofA Securities projects 430 basis points of margin expansion to 12.0% by fiscal year 2027, positioning their estimate approximately 10% above the current market consensus.

In other recent news, Estee Lauder has been at the center of several significant developments. HSBC upgraded the company’s stock rating from Hold to Buy, citing expectations of doubled earnings between fiscal years 2025 and 2027 due to cost-cutting and reorganization. This comes despite limited evidence of improved trends in key markets. Evercore ISI also raised its price target for Estee Lauder to $100, maintaining an Outperform rating, and noted increased investor interest following the passing of Chairman Emeritus Leonard Lauder. Deutsche Bank (ETR:DBKGn) joined in upgrading Estee Lauder to Buy, highlighting the company’s successful diversification strategy beyond China and investment in supply-chain enhancements.

Conversely, Moody’s downgraded Estee Lauder’s ratings from A2 to A3, attributing the decision to a slower-than-expected recovery in credit metrics, influenced by a soft Asia travel retail market and global economic uncertainties. The downgrade reflects concerns over the timing of profit improvements and existing macroeconomic challenges. Meanwhile, Estee Lauder expanded its online presence by launching in the Amazon.ca Premium Beauty store, offering Canadian customers access to its popular products. This move builds on a successful relationship with Amazon, following its debut on Amazon.com (NASDAQ:AMZN). These developments indicate a mix of strategic advancements and challenges for Estee Lauder as it navigates market dynamics.

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