Goldman Sachs Recommends Buying Estée Lauder Amid China’s Economic Recovery and Improved Margins
Goldman Sachs has updated its recommendation for Estée Lauder from Neutral to Buy. This change comes with a revised price target of $115, an increase from the previous target of $76. The bank cites a range of factors contributing to this improved outlook.
Key Drivers Behind the Upgrade
- Stronger Growth Momentum: Estée Lauder’s recovery in China is a significant factor. The company has experienced mid-single-digit sales growth in the second half of fiscal 2025.
- Improved Margins: Goldman Sachs projects a margin recovery will lead to an expansion of 500 basis points in EBIT margins by fiscal 2028.
- Travel Retail Resurgence: The rebound in travel retail, particularly in Hainan, has contributed to growth and improved inventory levels.
- Market Share Gains: In the U.S. market, Estée Lauder has regained market share, supported by a stronger presence on Amazon across eleven brands.
Recent Performance and Future Prospects
Estée Lauder recently reported a 12% decline in Q4 sales. This figure was slightly above expectations, indicating a potential for stabilization. Furthermore, the company has announced a regional reorganization that will take effect in July 2025, aimed at enhancing operational efficiency.
Goldman Sachs’ upgrade reflects a growing confidence in China’s economic recovery, alongside the anticipated growth in travel retail and sustained improvements in profit margins. Investors may find this an opportune time to consider increasing their positions in Estée Lauder.
