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On Friday, Estee Lauder (NYSE:EL) maintained its Buy rating and $81.00 price target from DA Davidson. The firm’s analysis indicates that Estee Lauder’s financial performance continues to be significantly influenced by its China-related sales, which constitute about 30% of the company’s revenue. According to InvestingPro data, the stock has experienced a significant 52% decline over the past year, currently trading at $67.25, with an impressive gross profit margin of 73%.
Estee Lauder has adopted a strategy of providing financial guidance on a quarterly basis due to the ongoing volatility in China and the Asia travel retail market. DA Davidson adjusted their expectations for the company’s organic sales in the third fiscal quarter of 2025 (F3Q25), improving their estimate to a 10% year-over-year decline from a previously anticipated 16% decrease. This revision follows Estee Lauder’s own forecast of a sales downturn compared to the channel restocking that occurred in F3Q24. InvestingPro analysis shows that while the company maintains strong liquid assets exceeding short-term obligations, 22 analysts have recently revised their earnings expectations downward.
The company’s new CEO is reportedly implementing measures aimed at achieving a swift return to sales growth. This leadership change comes amidst a challenging period for Estee Lauder, as evidenced by Chinese data showing that Hainan travel retail sales maintained a negative two-year stack in February 2025. However, there was a notable improvement, with a contraction of 10.9%, which is less severe than the 57.0% decline recorded in January 2025. Furthermore, the data revealed that sales were positive in four out of the last seven months. Despite current challenges, InvestingPro data highlights the company’s 30-year track record of consistent dividend payments, demonstrating long-term financial stability.
DA Davidson’s $81 price target for Estee Lauder stock is based on a 40-times multiple of their estimated calendar year 2026 earnings per share (EPS) of $2.02. The firm’s continued endorsement of the stock at this level reflects their analysis of the company’s financial outlook and strategic initiatives to navigate the current market challenges. Based on comprehensive InvestingPro Fair Value analysis, the stock currently appears undervalued, with analysts maintaining price targets ranging from $61.10 to $120.00. Get access to detailed financial metrics and 7 additional exclusive ProTips by subscribing to InvestingPro.
In other recent news, The Estée Lauder Companies reported a 6% decline in net sales for the second quarter of fiscal 2025, with notable decreases in skincare, hair care, and makeup. The company also announced a significant partnership with Serpin Pharma to innovate in skincare using anti-inflammatory processes. This collaboration aims to develop new products addressing skin issues like irritation and aging. S&P Global Ratings downgraded Estee Lauder’s credit ratings to ’A-’ due to a slower-than-expected business recovery, particularly in Asia, and increased restructuring charges. In response to financial challenges, the company has cut its dividend by approximately 47% and plans to reduce capital expenditures. Analyst firm DA Davidson maintained a Buy rating with a price target of $81, citing strategic efforts to streamline operations and boost innovation. Conversely, Stifel and Canaccord Genuity both lowered their price targets, reflecting concerns about Estee Lauder’s turnaround efforts and external market pressures. Despite these challenges, Estee Lauder is implementing a new strategic initiative under its CEO, focusing on innovation and operational efficiencies.
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