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On Tuesday, TD Cowen analyst Oliver Chen adjusted the financial outlook for Estee Lauder (NYSE:EL), increasing the price target to $80.00 from the previous $70.00, while maintaining a Hold rating on the company’s shares. Chen’s assessment reflects a cautious perspective on Estee Lauder’s near-term performance, citing several factors that may influence the company’s revenue stream. The beauty giant, currently valued at $30.12 billion, has maintained impressive gross profit margins of 72.36%, according to InvestingPro data.
Estee Lauder, according to Chen, is currently navigating a period of transition under new leadership. This change comes at a time when the company is experiencing subdued demand from Chinese consumers, a key market for the beauty giant. Additionally, the need for innovation within Estee Lauder’s established brand portfolio is expected to impact its sales trajectory.
Chen suggested that Estee Lauder might report second-quarter fiscal year 2025 results that could reach the higher end of its organic sales guidance, potentially surpassing the Street’s estimate of approximately a 7% decline. With earnings scheduled in just 7 days, InvestingPro data shows that 6 analysts have recently revised their earnings estimates downward, adding weight to Chen’s cautious outlook. Despite this potential near-term positive, the analyst projected that Estee Lauder could see a decline in sales during the second half of the fiscal year. Furthermore, Chen indicated that there are downside risks to the Street’s estimates for the latter half of 2025.
The valuation of Estee Lauder’s shares also presents a concern, as noted by Chen. The stock is currently trading at around 32 times forward-year two earnings, a significant increase from approximately 23 times when the company last reported earnings. This elevated valuation is considered a risk factor as the company approaches its earnings announcement. Current InvestingPro data reveals an even more striking P/E ratio of 147.84x, with technical indicators suggesting the stock is in overbought territory. For deeper insights into Estee Lauder’s valuation metrics and 8 additional exclusive ProTips, consider exploring InvestingPro’s comprehensive analysis tools.
In summary, while Estee Lauder may achieve sales at the higher end of guidance in the near term, the analyst from TD Cowen anticipates potential sales declines and risks in the second half of the fiscal year, alongside a notable increase in the company’s valuation multiples.
In other recent news, Estée Lauder, the New York-based cosmetics company, is reportedly reviewing its portfolio of beauty brands with the aid of Evercore Inc. This review could potentially lead to the sale of some brands in an effort to enhance the company’s share price. Additionally, the company’s board of directors has seen some changes, with Ronald S. Lauder retiring and Eric Zinterhofer, a founding partner of private equity firm Searchlight Capital Partners (WA:CPAP), L.P., elected as a Class II director.
Estée Lauder has also been impacted by market trends in China, with approximately 30% of its sales tied to the region. DA Davidson maintained a Buy rating on the company despite volatile trends in China and a significant decline in the company’s stock over the past six months. Furthermore, the company reported a 5% decline in organic sales for the first quarter of fiscal 2025, primarily due to downturns in mainland China, global travel retail, and Hong Kong SAR.
On the other hand, Estée Lauder’s shares experienced notable gains following strong quarterly results from Swiss luxury group Richemont (SIX:CFR). The positive performance from Richemont, a bellwether in the luxury goods industry, suggests a favorable environment for related companies such as Estée Lauder. These are some of the recent developments surrounding Estée Lauder.
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