Morgan Stanley upgraded Estee Lauder to Buy from Hold, citing the switch to e-commerce and “skin care momentum” as the main drivers fueling growth recovery in the long-term.
Morgan Stanley analyst Dara Mohsenian, who raised the stock’s price target to $233 (12.6% upside potential) from $196, sees “key value drivers as still intact longterm post COVID, particularly skin care momentum and a shift to e-commerce, and more COVID challenged areas as likely to recover, with new H2 FY21 EPS guidance and LT margin guidance from EL’s fiscal Q4 call providing more visibility.” The analyst believes that Estee Lauder is still on track in its years-long transformation into a “higher growth and higher margin company”.
Despite EL’s disappointing 4Q results on Aug. 20, many analysts turned bullish on the company’s long-term outlook. D.A. Davidson analyst Linda Bolton Weiser upgraded the EL to Buy from Hold and lifted the price target to $231 (11.6% upside potential) from $183 on Aug. 21.
Bolton Weiser noted that “Estee Lauder had enough confidence and visibility to issue first-quarter guidance,” which minimizes the risk of earnings disappointments in the future. The analyst expects e-commerce revenues to continue to grow in fiscal 2021.
Estee Lauder reported a loss of $0.50 a share in 4Q, versus analysts’ expectations of a loss of $0.19 per share. Its revenues of $2.43 billion missed Street expectations of $2.45 billion, due to store closures amid the coronavirus pandemic. Nevertheless, the company is positive about a COVID-19 recovery across all the regions, led by China, and expects sales trends to improve sequentially each quarter in fiscal 2021. For 1Q, EL expects its earnings in the range of $0.80 – $0.85 per share. (See EL stock analysis on TipRanks).
Currently, the Street has a cautiously optimistic outlook on the stock. The Moderate Buy analyst consensus is based on 10 Buys, 3 Holds, and 1 Sell. The average price target of $218.21 implies upside potential of 5.4%, with its shares trading almost flat on a year-to-date basis.
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