Key insights
- Goldman Sachs initiated coverage on Estee Lauder (EL) with a 'Buy' rating and a $100 price target, citing an undervaluation and a successful turnaround under new leadership and strategy. The firm highlighted EL's return to growth, margin expansion, and strong gross margins, supported by innovation and favorable trends in China's prestige beauty market. The termination of merger talks with Puig is also noted. This positive analyst view on a consumer staple company with exposure to China suggests potential upside for the stock and related consumer discretionary sectors.
Investing.com - Goldman Sachs reinstated coverage on Estee Lauder Companies Inc. (NYSE:EL) with a buy rating and set a price target of $100. The stock currently trades at $84.81, and according to InvestingPro analysis, appears undervalued with a Fair Value of $101, suggesting potential upside aligned with Goldman’s outlook.
The firm reinstated coverage on Monday, citing the market’s underestimation of the company’s growth sustainability following several years of execution challenges and underperformance.
Goldman Sachs noted that Estee Lauder has implemented changes since 2025, including new leadership, a new strategic vision, and an updated operating model called "One ELC." The company returned to top-line growth in fiscal year 2026 after three consecutive years of declines and achieved operating margin expansion of 300 basis points year-over-year in fiscal 2026 so far. The turnaround is supported by the company’s impressive gross profit margin of 74.65%, which provides flexibility for the innovation investments Goldman highlighted. For deeper insights into Estée Lauder’s financial health and exclusive ProTips, visit InvestingPro.
The firm said merger talks between Estee Lauder and Puig have terminated. Goldman Sachs expects the company’s growth momentum to continue based on the prestige beauty industry’s mid-single-digit long-term category growth potential and faster innovation that is gross margin accretive.
The firm highlighted improving business trends in China through a multi-brand approach driving market share gains, a right-sized travel retail business representing 15% of fiscal 2025 sales, and Hainan conversion trends that drove 30% retail sales growth in the third fiscal quarter.
In other recent news, Estée Lauder Companies Inc. has been actively involved in several developments. The company launched the Scent Scanner, an AI-driven tool on Pinterest, in collaboration with Jo Malone London. This tool aims to recommend fragrances based on users’ visual preferences and is available in the United States and France. In the UK, Estée Lauder announced the expansion of its manufacturing operations by integrating luxury candle and home fragrance manufacturing capabilities, adding approximately 50 employees to its workforce.
Meanwhile, discussions of a merger between Estée Lauder and Puig have ended due to disagreements over pricing, as confirmed by Estée Lauder’s CEO, Stephane de La Faverie. These talks, which began earlier this year, would have created a premium beauty company to rival others in the industry. On the analyst front, Bernstein initiated coverage of Estée Lauder with a Market Perform rating, citing structural challenges in the US market that may hinder growth. The firm’s analysis highlighted the ongoing decline in department store sales as a factor affecting the company’s channel mix.
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