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Investing.com -- Bank of America reinstated coverage of Estee Lauder (NYSE:EL) with a Buy rating and $110 price target, given signs of recovery in Asia and renewed confidence in the company’s restructuring plan.
The target implies roughly a 30% upside.
Estee Lauder, the world’s second-largest player in the $160 billion global prestige beauty market, has seen its earnings fall sharply in recent years, with EPS down 80% from its peak.
Much of the drag has come from China and travel retail in Asia, which together account for a significant share of revenue.
BofA said it believes the worst may be over. Demand in China has picked up in the past two quarters and discounting trends are becoming more rational, particularly during major shopping events.
The firm expects further improvement in the current quarter and a return to growth in Hainan duty-free sales by fiscal 2026, though it remains cautious on Korea due to ongoing wholesale exits.
The bank is backing the company’s “Beauty Reimagined” plan, which aims to revive sales and restore double-digit operating margins.
BofA forecasts 4% annual revenue growth and 430 basis points of margin expansion by FY27, putting its earnings estimates about 10% above consensus.
Key elements of the strategy include faster product launches, greater focus on high-growth retail channels, and a 10% workforce reduction aimed at generating up to $1 billion in gross savings.
Management plans to reinvest those savings into brand and advertising spend.
Estee Lauder currently trades at a steep discount to global beauty peers, and BofA believes improved execution and signs of market recovery could support a re-rating.