Why Estee Lauder Could Be Your Next 30% Gain

Estee Lauder Companies Inc. EL, a dominant force in the $160 billion global prestige beauty market, is poised for a significant turnaround as its ambitious “Beauty Reimagined” strategy takes hold.

Despite recent challenges, particularly weakness in Asia that has heavily impacted earnings, a new analyst coverage suggests a robust recovery is on the horizon, forecasting substantial revenue growth and margin expansion that could see the stock climb by 30%.

Bank of America Securities (BofA) analyst Ashley Wallace reinstated the coverage on Estee Lauder with a price forecast of $110, implying a 30% upside.

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Wallace sees the company's “Beauty Reimagined” plan to drive strong earnings recovery with, forecasting 4% revenue CAGR through fiscal year 2027 and 430 basis points of margin expansion to 12%, placing the year’s EBIT 10% above consensus.

The analyst sees the strategy, focused on innovation speed, new channels, and better cost efficiency, as a game-changer. A 10% reduction in headcount could yield up to $1 billion in savings, which may be reinvested into a 25% increase in brand and consumer marketing.

Estee Lauder, which earns $14 billion in revenue across 25 brands like M∙A∙C, Clinique, and La Mer, is the second-largest player in the $160 billion global prestige beauty market.

Weakness in Asia, particularly China and Hainan, has significantly impacted Estee Lauder’s earnings per share (EPS), which has plummeted by 80% from its peak.

However, Wallace believes the worst is now behind the company, citing two consecutive quarters of improved demand in China, with further strengthening expected in the fourth quarter of fiscal year 2025.

A more rational market environment during key shopping festivals and stabilizing trends in Hainan are also expected to bolster growth in fiscal year 2026. Conversely, Korea’s travel retail segment continues to face pressure due to a wholesale exit.

Wallace also highlights that Estee Lauder currently trades at 2.4x EV/sales, a significant discount compared to peers like L’Oréal. The analyst suggests that improved execution of the “Beauty Reimagined” strategy and more favorable market conditions could trigger a substantial re-rating of the stock.

Price Action: EL shares are trading higher by 6.48% to $92.23 at last check Thursday.

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