Estee Lauder stock price has been in a strong freefall, turning one of the most iconic companies in the United States into a fallen angel. It has plunged by almost 80% from its all-time high of $358 to the current $72.9, while its market cap has moved from $140 billion to $28 billion.
Why Estee Lauder stock price has crashed
There are several reasons why the Estee Lauder stock price has crashed hard in the past few months.
First, like other companies with exposure to the Chinese market, the company’s growth has largely stalled as consumer spending slows. Its annual revenue peaked at over $17.7 billion in 2021 and then moved to $15.9 billion in 2022 and $15.6 billion in 2023. Its trailing twelve-month (TTM) revenue fell to $15.4 billion.
Second, Estee Lauder’s profits have virtually disappeared in the past few years. Its annual revenue dropped from $2.4 billion in 2021 to just $217 million in the TTM, a figure that may continue falling in the near term.
The most recent financial results showed that Estee Lauder’s sales continued falling in the last quarter. Its net sales dell by 4% to $3.52 billion, with organic ones falling by 5% because of China. The CEO, Fabrizio Freda, said:
“Our first quarter results are largely aligned with our outlook on an adjusted basis, despite the fact that the expected headwinds in China and Asia travel retail were greater than anticipated.”
Additionally, Estee Lauder made a $156 million net loss, partially because of a $159 million charge associated with its talcum litigation. The company was accused of having talc, a carcinogen, in some of its products.
Estee Lauder stock could also be impacted by the incoming Donald Trump administration that has pledged to impose sweeping tariffs on imported goods. Such a move will likely lead to retaliation in China, a place where Estee Lauder wants to continue growing.
Analysts are pessimistic about its sales growth, with the average revenue estimate being $14.9 billion, a 4.5% drop below what it made last year. On the positive side, they expect it to return to growth in 2025 when its revenue will move to $15.47 billion. Its earnings per share is expected to move from $1.64 this year to $2.7 in the next financial year.
The other potential catalyst is that it will have a new CEO in January when Stephane de La Faverie will take over. In some instances, a change in management is usually a good step towards a turnaround.
Read more: The rise and fall of Estee Lauder as its stock price melts away
EL stock faces an uphill battle
Wall Street analysts are still cautious about Estee Lauder, with their average target being at $80, higher than the current $72.97. Most of them, including those at DA Davidson, Deutsche Bank, and TD Cowen have a neutral rating on the stock.
The daily chart shows that the EL share price has continued to make a series of lower lows and lower highs in the past few years. It has dropped below the key support levels like $130 and $100. $130 was its lowest level in March, while $100 was both a pyschological point and the lowest level in October last year.
Estee Lauder stock has remained below the 50-day and 200-day Exponential Moving Averages (EMA), signaling that bears are in control for now.
The stock has formed a near-perfect Elliot Wave and is now at the fifth section, meaning that it could start a corrective wave. Also, the Relative Strength Index (RSI) and the MACD indicators have all pointed upwards.
Therefore, there is a likelihood that the stock will bounce back some time in 2025 as investors buy the dip. Besides, it has become one of the cheapest companies in the industry. It is also under substantial activist pressure, which could see it have a turnaround.
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