[ad_1]
A challenging outlook for Estee Lauder ‘s Asia business has pushed Citi to the sidelines on its stock. Analyst Filippo Falorni downgraded the beauty company’s stock to neutral from buy and cut his price target by $45 to $195. His new target implies shares could rise 8.3% in the next 12 months from Monday’s close. “We had previously highlighted in our negative catalyst watch our concern with initial FY’24 guidance, but we now see more risk to the recovery path in 2H24,” Falorni said in a note to clients Tuesday. “We remain optimistic about the long-term revenue and margin opportunities at EL, but we expect weaker results over the next few quarters with negative incremental data points.” The stock slid 1.4% in Tuesday premarket trading. Shares are down more than 27% this year, massively underperforming the broader market. He said investors may need to question the company’s ability to bring earnings back to normal in the short term if there is continued weakness and poor guidance for the 2024 fiscal year. Challenges in Asia could push the company to guide even more conservatively, further spooking investors. “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 ‘normalized earnings power’ of EL for FY25,” he said. Citi’s checks in China show consumers continue to trade down from premium to mass market brands, while Estee Lauder’s inventories remain elevated, Falorni said. A shift in the company’s sales mix can also raise purported risks related to the brand’s image and resell pricing, the analyst added. These concerns come despite Falorni’s longer-term bullishness, with expectations for profit to grow more than peers. Beyond China, Falorni also noted the company’s recent disclosure that parts of its business were disrupted by a cyberattack. While having little details, Falorni said the attack could “compound an already difficult situation.” — CNBC’s Michael Bloom contributed to this report
[ad_2]
Source link
