On Tuesday, DA Davidson sustained its Buy rating on Estee Lauder shares (NYSE:EL) with a price target of $130.00. The company, with approximately 30% of its sales in Mainland China and China-related travel retail, experienced an earnings downturn through the first half of fiscal year 2024, attributed in part to surplus inventory in Asia's travel retail channels, including Hainan. However, a restocking phase occurred in the second half of the fiscal year.
Despite the replenishment of inventory, Estee Lauder's organic sales are anticipated to see a year-over-year decline in the first quarter of fiscal year 2025. This forecast follows a weakening in point-of-sale (POS) figures in Asia's travel retail sector during the fourth quarter of fiscal year 2024. The analyst pointed out that sales in Hainan's travel retail sector picked up pace in August 2024, showing positive growth on a two-year stack basis for the first time since May 2024, at a rate of 207.5%.
The stock price target set by DA Davidson is based on a multiple of 40 times the estimated earnings per share (EPS) for calendar year 2025, which is projected at $3.25. This valuation reflects the firm's confidence in Estee Lauder's future performance despite the recent challenges in the travel retail market.
Estee Lauder's stock rating and price target remain unchanged as the company navigates the dynamic retail environment in Asia. The firm's outlook takes into account the recent sales trends in China's Hainan province and the broader implications for the company's revenue streams in the region.
In other recent news, Estee Lauder's Profit Recovery and Growth Plan aims to deliver between $1.1 and $1.4 billion in net profit over fiscal year 2024 levels. However, the first quarter fiscal year 2025 forecast fell short of expectations, leading DA Davidson to revise its earnings per share estimate for Estee Lauder, reducing it by $1.28, or 30%, to $2.95.
In a significant move for the company, Haider Ackermann has been appointed as the new Creative Director for TOM FORD, a part of Estee Lauder's portfolio. This development is expected to drive the brand's expansion into its next phase.
Estee Lauder has been the subject of various analyst ratings. Evercore ISI maintained an Outperform rating on the company, despite observing a contraction in China's cosmetic import trends. B.Riley initiated coverage on Estee Lauder's shares with a Neutral rating and a price target of $95.00, citing current market challenges.
Piper Sandler reiterated its Overweight rating on Estee Lauder, maintaining a price target of $114.00, while Bernstein SocGen Group revised its price target for Estee Lauder, lowering it to $100, maintaining a Market Perform rating. These are the latest developments surrounding the company.
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