In separate notes on Thursday, Jefferies downgraded Estee Lauder Companies Inc (NYSE:EL) and Coty Inc (NYSE:COTY) to Hold from Buy.
The firm slashed the price target for EL to $190 from $270, stating there are concerns about the prolonged recovery in China and the skincare shift.
"Growing concerns around the recovery of EL's key drivers (China/TR and skincare) lead us to lower est. to 10%/5% below cons. in FY24/FY25 and d/g the stock to HOLD," analysts explained. "China sales and our new Tmall data set point to prolonged recovery, and concentration in the region (~35% mainland + Hainan) will be hard to offset in US, where brands are losing share."
"Less understood by the mkt, a cycle shift to makeup from skincare and skincare trade down will pressure margins," the firm added.
For COTY, the price target was cut to $14 from $16 per share, telling investors they are pressing pause on the stock after its recent momentum.
"With shares +45% YTD, we see risk/reward more balanced around: 1) premium fragrance (55% of mix) slowing, 2) headline risk remains around key licenses (Gucci), and 3) skincare catalyst will be challenged by trade down and cycle shift to make up," the research said.
"Our confidence in the co's ability to 2x skincare and drive growth in China/TR is unchanged, but inflection now more MT-focused, leading to more rangebound expectation NT."