Estee Lauder stock price: Still in trouble despite Nelson Peltz news

Estee Lauder (NYSE: EL) stock price jumped by more than 2.30% in the premarket as investors reacted to the latest news. The shares jumped to a high of $209.76, which was much higher than last week’s low of $190. They remain ~43% below the highest point in 2022.

Estee Lauder, the parent company of Clinique, Jo Malone, Aveda, and Bobbi Brown, has come under pressure in the past few days. The company’s stock plunged by over 17% on Wednesday after the company published relatively weak financial results.

The results revealed that organic sales dropped by 8% while earnings per share fell by 75% to 47 cents. In its statement, the firm attributed this situation to challenges in Asia’s travel retail business. Organic sales in APAC jumped by 7% while in EMEA, it dropped by 24%. 

In all, Estee Lauder’s fragrance revenue rose by 14% while skincare dropped by 17%. The firm expects its business to go through challenges this year, with China’s economy recovering at a slower pace than expected. It also expects to be hit by higher inflation and tighter inventories in key regions. The CFO said:

“We are lowering our full-year outlook to reflect continued decline in net sales in Asia travel retail we plan to invest in markets where traffic and consumption are returning, and expect to return to overall net sales growth in the fourth quarter.”

The main catalyst for the Estee Lauder stock price is a report that Nelson Peltz is eying the company. According to NY Post, Peltz hopes to push the company to replace its current CEO, Fabriziu Freda, for what he believes is years of underperformance. The company’s stock return in the past three years has underperformed the S&P 500 index.

A likely remedy could be cost cuts in a bid to streamline the company’s operations. The company has increased the number of employees recently to almost 60,000. Nelson Peltz recently pushed Walt Disney to slash costs, which saw it lay off thousands.

The other solution is to sell the company, a major issue considering that the company has a market cap of over $72 billion. As such, a deal would need to value the company at over $80 billion.

A likely buyer would be LVMH, the biggest European company. According to the NY Post report, Bernard Arnaut has previously expressed hopes of acquiring the company in a bid to compete with L’Oreal. Still, it is unclear whether he will be ready to chuck over $80 billion for a company that generated $2.4 billion in net profit in 2022.

The Estee Lauder stock price will likely have a relief rally on Monday and then resume the downward trend as Nelson Peltz hype fades. On the daily chart, we see that the shares managed to invalidate the inverted head and shoulders pattern whose upper side was at $282. It has now moved below all moving averages and the left shoulder at $225. Therefore, the shares will remain under pressure for a while and then rebound later this year.


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