On Monday, Estee Lauder (NYSE:EL) received an updated price target from DA Davidson, reflecting a more optimistic outlook for the company's financial performance. The new price target is set at $191.00, an increase from the previous $179.00, while the firm maintains a Buy rating on the stock.
The adjustment comes after an evaluation of the company's sales dynamics, particularly in China and China-related travel retail, which account for about 30% of Estee Lauder's sales. The beauty giant had experienced a downturn in sales and earnings, attributed mainly to excess inventory in the Hainan region and the daigou channel—a network of overseas shoppers who buy products to sell in mainland China.
Recent data collection efforts have revealed a significant shift at a daigou seller that DA Davidson has been tracking. This change is seen as an indication that the inventory overhang might have been resolved. "Our confidence is higher that EL can return to positive organic sales growth in F3Q24, with possible double-digit growth in F4Q," said the analyst.
In light of these findings, DA Davidson has raised its earnings per share (EPS) estimates for Estee Lauder for fiscal years 2025 and 2026 by 5% and 9%, respectively. The new price target of $191 is based on a 40 times multiple of the revised calendar year 2025 EPS projection of $4.78, which has been increased from the earlier estimate of $4.47.
InvestingPro Insights
Estee Lauder's (NYSE:EL) recent financial performance and DA Davidson's updated price target are complemented by key metrics that highlight the company's market position. With a market capitalization of $49.76 billion and a high gross profit margin of 70.04%, Estee Lauder shows a strong capability to generate revenue efficiently. However, investors should note the company's high P/E ratio at 106.32, which suggests a premium market valuation. Despite a dip in revenue growth by 7.33% over the last twelve months as of Q2 2024, Estee Lauder's substantial gross profit and the ability to maintain dividend payments for 29 consecutive years demonstrate financial resilience.
Two InvestingPro Tips offer additional insights: Estee Lauder has been praised for its impressive gross profit margins, which align with the high margin observed in the data. Moreover, the company is recognized for operating with a moderate level of debt, indicating a balanced approach to financial management. For investors looking for a more in-depth analysis, there are 8 additional InvestingPro Tips available that could provide further guidance on Estee Lauder's financial health and stock potential.
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