Shares of Estée Lauder (NYSE: EL) rose sharply on Monday after Goldman Sachs upgraded the stock from Neutral to Buy, citing improving fundamentals, stabilizing demand in China, and progress in management’s strategic initiatives.
The firm also raised its price target to $115 from $76, expressing confidence that the cosmetics maker is approaching a “fundamental inflection point.”
Goldman sees turnaround momentum building
Goldman Sachs analyst Bonnie Herzog said Estée Lauder could return to topline growth as early as the first fiscal quarter and achieve double-digit EBIT margins by fiscal 2027.
The investment bank believes the company’s “Beauty Reimagined” strategy is beginning to take effect, positioning Estée Lauder for a multiyear recovery after several challenging years.
Goldman Sachs expects Estée Lauder to deliver approximately 500 basis points of EBIT margin expansion through fiscal 2028, aided by cost savings and operational efficiencies.
The firm noted that gross margins improved by 236 basis points in fiscal 2025, supported by productivity initiatives and better pricing execution.
Herzog credited the company’s consumer-first approach and expansion across digital platforms such as Amazon and TikTok as key steps in revitalizing growth.
“We believe management is taking steps in the right direction,” she wrote, noting that improving trends in China make Estée Lauder’s current valuation attractive.
Estée Lauder’s shares have surged 70% over the past six months, signaling renewed investor confidence.
The stock climbed 7.88% on Monday to $94.57, following a 7% drop in the prior session during a broad market sell-off.
Goldman’s optimism follows similar calls from other major banks.
HSBC and Deutsche Bank recently upgraded the stock to Buy, while BofA Securities reaffirmed its positive rating.
China and travel retail show early signs of recovery
Estée Lauder’s performance in China—a key market that had weighed heavily on results in recent years—is showing signs of stabilization.
Goldman noted that mainland China sales returned to mid-single-digit growth with market share gains in the second half of fiscal 2025, following earlier declines.
The firm also highlighted improving conditions in travel retail, which had been among Estée Lauder’s hardest-hit segments during the pandemic.
The category once represented nearly a third of total sales but fell to about 15% in fiscal 2025.
Recent data indicates that Hainan, a major travel retail hub, returned to growth in May, while inventories across the channel improved.
Goldman said management’s efforts to boost conversion rates and manage supply more efficiently have started to pay off.
The company had previously warned of $100 million in tariff-related headwinds for fiscal 2026, but analysts believe that operational discipline and stronger productivity could offset these challenges over time.
Digital expansion and margin recovery support outlook
Under CEO Stéphane de La Faverie, Estée Lauder has accelerated its digital transformation, expanding its online presence and launching 11 brands on Amazon to reach a broader customer base.
With improving US market share trends, a stabilizing China business, and early signs of a travel retail recovery, analysts now believe Estée Lauder’s turnaround is gaining traction.
As Herzog summarized, the company appears to be “turning a corner” after years of headwinds, positioning itself for sustained growth in the prestige beauty industry.
The post Estee Lauder surge 7% after Goldman Sachs upgrade to “Buy” appeared first on Invezz
