Stock market today: Stocks fall as investors rotate out of tech into Jackson Hole
On Monday, Estee Lauder (NYSE:EL) shares maintained an Equalweight rating and a $140.00 price target from Morgan Stanley.
The beauty company's fourth-quarter earnings surpassed expectations, but the announcement of the current CEO's upcoming departure and a weaker-than-anticipated forecast for the first quarter and fiscal year 2025 have set a cautious tone for the stock.
Estee Lauder's guidance suggests slower growth ahead, with company projections of 2-3% category growth and potential market share changes ranging from a 1% decline to a 2% increase. This falls below the expected category growth rate. Additionally, the company's margin forecast for the fiscal year is set at 11-11.5%, significantly lower than the consensus estimate of 13.4%.
"While admitting very low visibility, margin guidance also looks conservative on the surface to us, and likely more of a clearing event," said Morgan Stanley analysts.
The subdued outlook for long-term revenue growth has become less apparent, which could prompt a negative reaction in the stock market.
Despite these challenges, the potential for a new CEO, possibly from outside the company, is seen as a potential upside. This sentiment is based on recent positive outcomes from leadership changes at other firms, such as Starbucks (NASDAQ:SBUX).
The company's CEO, Fabrizio Freda, announced his plan to retire by the end of fiscal year 2025, prompting the board to search for a successor.
Meanwhile, Canaccord Genuity maintained a Hold rating on Estee Lauder but reduced the price target to $100, while Citi reaffirmed a Buy rating with a $110 price target. However, BofA Securities downgraded Estee Lauder from Buy to Neutral due to concerns over weaker-than-anticipated performance in the beauty sector within China.
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