Another CEO Down, This Time It's Estée Lauder's Makeup Maestro (A Soaring Stock Ahead?)

Well in the world of Estée Lauder, everything is flawless from the foundation to the glitter… but when it comes to the company's financials? Ehh not so much. Which is why after Starbucks, and Victoria Secret decided to sideline their CEOs, it seems that Estée Lauder Companies Inc., CEO Fabrizio Freda, decided to get ahead and call it quits himself. 

(Source: CNBC) 

You see, after sixteen years of being at the helm of the second largest cosmetic companies in the world (after L'Oréal),  Freda is packing his bags due to a backdrop of mixed financial performance and declining sales in key regions.  

For instance, recent announcements indicate a decline in sales, particularly in key markets such as China. For the fiscal year, net sales in the Asia Pacific region fell by 3%, contributing to an overall challenging environment for the prestige beauty sector.

(Source: Yahoo Finance) 

However, now with Freda relinquishing his roles (still staying on until fiscal 2025, *booo*), this has the board on a mad scramble to find their next makeup maestro as shares dipped -2.23% on the day. Which basically only adds insult to injury considering the stock is down a blistering -36.16% YTD. 

(Source: Morning Star)

With that said, Freda tried to put a little contour on his exit as he expressed pride in the accomplishments that the company has achieved during his leadership. But honey (as my wife would say), when your stock is down -36% this year and -53% over five years, that's not a look – that's a lewk, and not in a good way. Which is why investors weren’t sold on any optimism he had to give.

(Source: Giphy) 

Now keep in mind, while Freda was basically patting himself on the back for being a CEO for nearly 20 years (maybe a bit too long for investors, “Where you been Elliot Management?”), Estée Lauder’s isn’t the only cosmetics company that’s faced demand challenges. For instance, competitors like L’Oréal are experiencing similar struggles with reported declines in specific regions, reinforcing the notion that the beauty industry is grappling with a broader slowdown in demand. 

(Source: Reuters) 

Yet for Estée Lauder, the struggles are particularly pronounced in the makeup and skincare categories, where sales have decreased by -1% and -3%, respectively - mainly due to a sluggish global travel retail market and weak demand in prestigious beauty products in Mainland China.

So clearly, with Freda at the helm, the company has gained more wrinkles than my 80 year old grandma who's still addicted to tanning beds. But now with a new CEO incoming, the company may end up getting a nice dose of Botox, in terms of innovative marketing and better direction on growth potential. 

(Source: Giphy) 

On the other hand, when it comes to Wall Street, they aren’t too convinced of the hope either way. For example, Bank of America and Raymond James analysts both downgraded the stock while JP Morgan analyst, Andrea Teixeira, maintained an Overweight rating, yet cut the price target from $145 to $129 (still indicating a +35.83% upside from current levels). 

(Source: Webull) 

Additionally, the technical analysis doesn’t add any optimism to the situation as 14 out of 17 indicators we have at Stocks.News are sitting in the “Strong Sell” category, while 13 out of 15 moving averages are showing more downtrend continuation.

So obviously, as we can all see, Estée Lauder is plum full of mixed emotions. So for that reason, I wouldn’t touch this stock to save my life.

Simply put, there’s no clear path in terms of leadership (regardless if Freda is staying on until 2025 or not), and with their mixed financials combined with their poor price action, this is definitely a “wait and see” game for investors looking to capitalize on the cosmetics industry.

(Source: Giphy) 

So with that said, will Estée Lauder come through with the Dan Niccols of makeup? Or will they continue to plunder even after their CEO sacrifices himself for the good of the company? Only time will tell friends, only time will tell…

At the time of this writing, Estée Lauder is down -2.24% on the day (down -36.16% YTD). 

Stocks.News holds positions in Starbucks as mentioned in the article.