Estee Lauder cut at Deutsche Bank on near-term downside risks

Deutsche Bank downgraded shares of Estee Lauder (NYSE:) to Hold from Buy, maintaining a $146 price target on the stock in a note Tuesday covering US consumer-related stocks in 2024.

Analysts told investors that their firm’s fundamental outlook and views on EL are unchanged versus their expectations following meetings with the company’s CFO a month ago. However, the stock has appreciated roughly 20% or more since then and is now trading roughly in line with the bank’s $146 target price.

“While we continue to see long-term upside should Hainan/Korea inventories clear as anticipated by roughly April 1, underlying China performance subsequently rebound and improve, and EL make good on its profit acceleration efforts, we also see near-term downside risk from here should China inventory/brand recovery progress encounter delays and/or US market conditions continue to slow/struggle,” the analysts wrote.

Questions of management succession and/or possible M&A actions also present a two-way risk at this point, according to Deutsche Bank.

Over the long term, the firm notes top-line growth opportunities for EL, including in skin care and, anti-aging and makeup recovery. They also believe there is a significant upside to the muted near-term Asia travel channel expectations.