Estee Lauder stock price has been left behind in the past few years as the once-popular brand goes through its deepest slump in years. It has plunged from a high of $354 in January 2022 to $63, erasing billions of value and costing thousands of jobs.
EL stock price was trading at $63.67 on Thursday, a few points above the year-to-date low of $49.35. This article explains why the shares have plunged and why technicals point to a rebound soon.
EL stock has crashed as growth wanes
Estee Lauder, one of the top players in the cosmetics industry, has been in a deep slump in the past few years as its growth waned. Its annual results show that its revenue peaked at $17.7 billion in 2022 and then dropped to $15.9 billion in 2023 and $15 billion last year.
Analysts anticipate that this trend will continue this year, and possibly change next year if the anagement’s strategy works. The average estimate is that its revenue will drop by 8.4% this year to $14.30 billion.
Estee Lauder’s slowdown is mostly happening in China, one of its biggest markets outside the United States. Its American business is also not doing well as consumers shift to other cheaper brands like ELF.
All its segments are struggling, with the worst-performing ones being the skin care and hair care businesses. The most recent numbers showed that its skin care and hair care revenue dropped by 12%, while the makeup and fragrance figure fell by 9% and 3%.
Read more: How a China bet and generational shifts cost Estée Lauder $100 billion
The total revenue in Q1 came in at $3.5 billion, a 10% decline from the previous $3.9 billion. As a result, profitability was also affected, with the net earnings fallng by over 53% to $159 million.
The company, now under Stephane de La Faverie, is implementing a strategy known as ‘Beauty Reimagined’. Its goal is to restore growth by accelerating the best-in-class consumer coverage, boosting innovation, making more consumer-facing investments, and improve efficiencies.
As part of the latter approach, the management has already announced mass layoffs as it hopes to save between $800 million and $1 billion a year. It is slashing about 11% of its workforce or about 7,000 people.
Its strategy also calls for more e-commerce, increased focus on premium brands, and change how it advertises.
Wall Street analysts are largely neutral on Estee Lauder stock, with the average target price being $67.55, slightly up from $63.67.
Estee Lauder stock price analysis
The weekly chart shows that the EL stock price has been in a strong downtrend in the past few years, moving from a high of $354 in 2022 to $50.
On the positive side, it has formed a highly bullish falling wedge pattern, which consists of two descending and converging trendlines. In most cases, this pattern leads to a strong bullish breakout when the two lines are nearing their confluence.
Therefore, the stock will likely have a strong bullish breakout, with the next point to watch being at $99.6, the lowest point in October 2023.
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