Estée Lauder: Recovery Again Postponed; Stock Back to 2017 Levels, Unfairly

Company Update (EL US) (Buy)

Highlights

• Shares lost 19% on Wednesday after Q1 FY24 results

• De-stocking and its impact are depressing EL earnings

• EL now at 20.4x FY19 EPS and has a 2.4% Dividend Yield

• Growth will return; EL sees double-digit growth in H2

• At $112, we see a 48% total return (16.3% p.a.) by June 2026

Introduction

Estée Lauder (“EL”) shares fell 18.9% on Wednesday (November 1) after the company announced Q1 FY24 results, though rebounding 7% to around $112 as of 11:30 EST today (November 2). The share price has now fallen by 70% since the end of 2021 and has returned to levels last seen in 2017:

EL Share Price (Since 1995 IPO)

Source: Google Finance (02-Nov-23).

We have been wrong on EL. We have maintained a Buy rating on the stock since we first published our research in April 2020. More recently, following the collapse in its share price year-to-date, we have re-established a position in EL in mid-August and added it to our “Select 15” model portfolio in September. Both now look far too early with hindsight.

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