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Tuesday, Canaccord Genuity updated their assessment of Estee Lauder (NYSE:EL) shares, lowering the price target to $62 from the previous $70, while continuing to recommend a Hold position on the stock. According to InvestingPro data, the stock is currently trading near $59, down nearly 59% over the past year, with analyst targets ranging from $55 to $120. The adjustment reflects a reduced valuation multiple, from 30 times the estimated earnings per share (EPS) for fiscal year two to 27 times, amid growing uncertainties and diminished visibility that are expected to further impact the company’s performance and valuation. Despite recent challenges, the company maintains impressive gross profit margins of 73% and has sustained dividend payments for 30 consecutive years.
Estee Lauder is anticipated to face ongoing challenges, including a normalization of beauty product demand in the United States and Europe, as well as persistent pressures in Asian markets and the Asia travel retail channel. The ongoing trade tensions between the U.S. and China, with tariffs being a key concern, are likely to delay any recovery in these critical segments for Estee Lauder.
For the third quarter of fiscal year 2025, ending in March, Canaccord predicts that Estee Lauder will achieve its financial guidance, with sales estimated to drop 10.3% year-over-year, which is slightly more optimistic than the consensus estimate of a 10.8% decline and within the company’s own forecasted range of a 10% to 12% decrease. Adjusted EPS is projected to be $0.31, aligning with consensus estimates and surpassing the guided range of $0.20 to $0.30.
The research firm is keen to hear management’s expectations regarding the impact of tariffs and any updates on consumer sentiment across key markets during the upcoming earnings call. While acknowledging that Estee Lauder’s "Beauty Reimagined" strategy, which involves increased investment in its brands, is a step in the right direction for a long-term recovery, Canaccord Genuity believes it will take time for these efforts to show results. This perspective keeps the firm on the sidelines for now. InvestingPro analysis suggests the stock is currently undervalued, with additional insights available in the comprehensive Pro Research Report, which provides detailed analysis of the company’s financial health and future prospects.
In other recent news, Estée Lauder Companies Inc. has appointed Brian Franz as its new Chief Technology, Data & Analytics Officer, marking a strategic move towards technological transformation. Franz’s appointment is part of the company’s "Beauty Reimagined" initiative, aimed at modernizing its technology infrastructure and enhancing consumer-focused operations. Meanwhile, Estée Lauder is facing a lawsuit over allegations of misleading shareholders about its reliance on gray-market sales in China, following a government crackdown. A federal judge ruled that shareholders identified misleading omissions in the company’s disclosures, particularly regarding the impact of the crackdown on sales.
Additionally, DA Davidson has maintained a Buy rating for Estée Lauder, with an $81 price target, citing positive social media engagement trends for key brands contributing significantly to sales. The firm’s analysis also highlights the company’s strategic focus on its stronger brands, while weaker brands such as Origins, Too Faced, and GlamGlow may face divestment. The company’s financial performance is heavily influenced by its China-related sales, which make up a substantial portion of its revenue. Estée Lauder’s recent leadership changes and strategic measures are aimed at navigating market challenges and returning to sales growth.
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