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Downgrading Estee Lauder to Perform

  • Oppenheimer & Co. Inc.
  • February 5, 2020

Near-Term Risks Now Outweigh Very Attractive Longer-Term Prospects

Oppenheimer analysts are downgrading shares of Estée Lauder to Perform from Outperform and removing Estée Lauder as a top pick. Due to recent developments in China with the coronavirus, coupled with the premium valuation at which shares trade, our analysts no longer view the risk/reward as attractive from current levels.

makeup retail

Although it is difficult to measure the precise impact and the length at which the coronavirus-related challenges could persist within the Chinese economy, our analysts now expect Estée Lauder's higher margin travel-retail segment to be adversely impacted at least until Q3 (March) and potentially longer.

As a result, with our team's expectations for slower growth rates near-term, we believe Estée Lauder's premium valuation is at risk. Our analysts believe longer-term investors should await a more attractive entry point before again speculating on the company's superior longer-term prospects.

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