Estée Lauder: Buy, Sell, or Hold in 2025?

Estée Lauder Companies Inc. (EL) has faced a challenging start to fiscal 2025, with net sales declining by 4% and a net loss per share of $0.43. Despite efforts to stabilize sales and margins, the company continues to grapple with economic headwinds, particularly in China and Asia's travel retail sector. As investors consider Estée Lauder's prospects for the remainder of 2025, the question remains: is it a buy, sell, or hold?



Buy Estée Lauder

Investors may find reasons to be optimistic about Estée Lauder's long-term prospects. The company's Profit Recovery and Growth Plan (PRGP) has delivered some margin improvements, and new product launches in skin care and fragrance categories have shown promise. Skin care, in particular, saw growth in EMEA and the Americas, driven by popular nighttime products from the Advanced Night Repair and Revitalizing Supreme+ lines. Additionally, Estée Lauder has successfully expanded its online footprint, including launches on Amazon's U.S. Premium Beauty store, signaling an attempt to diversify revenue streams and enhance direct-to-consumer sales.

Sell Estée Lauder

The major concern lies in Estée Lauder's reliance on the Asia Pacific market, particularly China, where consumer sentiment remains low, affecting both retail and travel retail segments. The company also announced a dividend reduction, aiming to adjust to a more sustainable payout ratio, a change that reflects near-term profitability challenges. Estée Lauder's decision to withdraw its fiscal 2025 outlook emphasizes the uncertainty in key markets, and litigation charges linked to talcum settlements have increased operating costs.

Hold Estée Lauder

Estée Lauder seems like a good candidate for a wait-and-see approach, considering that the company's turnaround plan is still being implemented and the China situation remains fluid. At this point, the geopolitical environment is also a factor, as tariffs and a strong dollar are likely to put pressure on multinational companies like Estée Lauder, though it's unclear how tariffs will play out. Additionally, while the stock may not be cheap, given how far its profits have fallen, selling now would eliminate any chance of benefiting from a rebound.

In conclusion, Estée Lauder's Q1 fiscal 2025 results highlight significant regional challenges, compounded by operational restructuring costs and talcum litigation expenses. Investors may view Estée Lauder as a long-term play if market stabilization occurs, but short-term caution is warranted given the current outlook and Stock Target Advisor's very bearish stance. As the company continues to execute its PRGP and navigate market uncertainties, investors should closely monitor Estée Lauder's progress and reassess their positions accordingly.