Analyst Bonnie Herzog highlighted an anticipated fundamental shift, attributing it to strategic initiatives implemented by the management team. “We estimate the business could potentially return to topline growth as soon as FQ1 (September), which should be followed by a return to double-digit EBIT margins in FY27 and beyond,” Herzog noted. She emphasized that after discussions with Estee Lauder’s CEO and CFO during their February 2025 meeting in New York City, it became clear that management is making significant strides with its “Beauty Reimagined” strategic vision. This approach focuses on a consumer-first mentality and aims to deliver faster, trend-driven innovations, addressing key issues that have contributed to the company’s underperformance in recent years.
A resurgence in growth within mainland China is also expected to positively impact Estee Lauder’s stock. Herzog pointed out that during the company’s June earnings call, management reported “encouraging early trends” in mainland China, which could be further enhanced by efforts to diversify into other emerging Asian markets over time. Additionally, Herzog praised the company’s initiatives to expand its presence in rapidly growing channels, including specialty beauty retailers and partnerships with platforms like Amazon and TikTok. “Notably, management views these platforms as an essential part of its new media model, where they amplify demand for its brands as consumers increasingly search for beauty products across these channels,” she explained.
Herzog’s revised price target is based on the belief that Estee Lauder is currently undervalued. She noted that the stock is trading at approximately 18 times its enterprise value to EBITDA, which is below its five-year average multiple of around 24. “We believe Estee Lauder is significantly under-earning compared to what the company achieved in FY19, despite maintaining a similar revenue base,” she added.
Following this optimistic outlook, Estee Lauder shares experienced a rise of more than 4%. Year-to-date, the stock has increased by over 16%. However, despite Goldman’s upgrade, analysts remain mostly neutral on the stock. According to LSEG data, 22 out of 28 analysts covering Estee Lauder have rated it as a “hold,” while the remaining six analysts have issued “buy” or “strong buy” ratings.
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