Shares of beauty giant Estee Lauder are rising for a second day.
Gabby Jones/Bloomberg
Estee Lauder turned in a great fiscal second quarter on Friday, and the stock is rising again Monday, following bullish analyst reaction to the results.
Estee Lauder (ticker: EL) delivered earnings and revenue that were well above consensus estimates, while outlining a plan to double down on e-commerce, as the pandemic highlighted the chasm between online sales and lackluster performance at some brick-and-mortar stores. Although its guidance was a bit light, the company said it plans to resume share repurchases in the second half of its fiscal year following its unexpectedly strong revenues, and it would return to long-term-growth targets after recovering from pandemic disruption.
The stock traded up nearly 8% on the news, and is rising again Monday, up 3.2% to $281.56 in recent trading, as the results earned it at least two upgrades.
Jefferies’ analyst Stephanie Wissink raised her rating on Estee Lauder to Buy from Hold, and lifted her price target to $310 from $240 on the news, citing the “huge beat” from a company she sees as a “China proxy with [a] winning formula.”
She writes that there’s plenty of upside left for the stock, even as it’s risen more than 30% in the past 12 months, given its ongoing strength in the Asia-Pacific region, specifically China, which is “THE single most critical driver of the model.” While makeup demand took a hit during the pandemic, Estee Lauder was able to drive sales of its skincare products—which now account for 48% of its business—instead, a change that she thinks is permanent.
Wissink is also upbeat about the company’s balance sheet, ongoing innovation, and ongoing investments in e-commerce.
In addition, J.P.Morgan analyst Andrea Teixeira double upgraded Estee Lauder, to Overweight from Underweight, and boosted her price target to $299 from $208.
The quarter’s strong results are responsible for the about-face, as she writes that they demonstrate that Estee Lauder “has been able to successfully pivot travel and department store sales to the online channel much faster than anticipated.”
She was previously concerned that consumers’ shift to e-commerce would be a headwind for Estee Lauder, but the company has proven that it can more than hold its own against digital rivals, as evidenced by a strong holiday season. And like Wissink, she thinks the company’s ongoing success in skincare will endure long past the pandemic.
Estee Lauder stock is up roughly 37% since Barron’s recommended them in August.
Write to Teresa Rivas at [email protected]
