When it comes to Estée Lauder’s stock, Wall Street is definitely getting less and less optimistic.
On Tuesday, Citigroup’s Filippo Falorni downgraded the beauty retailer’s (ticker: EL) shares to Hold for the first time since the firm resumed coverage with a Buy rating in February. The analyst also lowered the target price to $195, from $240 earlier.
Estée Lauder
‘s shares were down 1.6% on Tuesday, to $177.15, while the
S&P 500
was down 0.4% and the
Dow Jones Industrial Average
was up less than 0.1%. Barron’s picked
Estée Lauder
stock in July 2022 — and it hasn’t gone well.
The firm has talked about how its sales were affected by the slower-than-expected recovery of traffic in China and other Asian markets. In May, it cut its forecast for adjusted earnings per share for the fiscal year 2023 that ended in June to a range of $3.29 to $3.39 from its February forecast for adjusted earnings of up to $5.02 a share. Analysts currently forecast $3.36 in annual earnings per share.
The company reports results for the final quarter of the fiscal year 2023 on Aug. 18 before the market opens. Wall Street expects Estée Lauder to report a loss of four cents a share for the quarter which would be its first quarterly loss in three years.
Investor confidence likely took another hit on July 18 after Estée Lauder shared news about a cybersecurity incident that disrupted parts of its business operations.
Citi
‘s Falorni expects results to be weak over the next few quarters as China mobility and other issues loom. “Importantly, while we think the market is braced for a low initial FY24 guidance, we worry continued weakness in results may lead investors to question” the power of earnings to grow, the analyst said.
Citi’s move to the sidelines follows a similar downgrade by Oppenheimer analyst Rupesh Parikh on June 5. He cited a risk of conservative guidance from management as well as concerns that consumer spending power is weakening.
Jefferies’ Ashley Helgans and Piper Sandler’s Korinne Wolfmeyer also downgraded Estée Lauder’s shares to Hold from a Buy equivalent rating last week, according to FactSet. Overall, 55% of analysts tracking the stock rate it as Buy, 42% are on Hold, up from 29% in June and May, and the rest say Sell.
Estée Lauder’s stock is down 29% this year versus a 19% gain for the S&P.
Write to Karishma Vanjani at [email protected].
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