Estee Lauder stock price analysis: the day of reckoning is here

Estee Lauder (NYSE: EL) stock price will be in the spotlight on Monday as the company publishes its fourth-quarter earnings. These will be important results since the company has been quite embattled in the past few months. Its stock has plunged by more than 63% from its 2022 high, underperforming its peer companies like ELF and L’Oreal.

Monday will be Estee Lauder’s day of reckoning because of its recent performance. Data compiled by TradingView shows that the stock has plunged after publishing its quarterly results since October 2022. 

The shares dropped by over 20% after it published its recent results in October and by 24% after its previous results. Similarly, the stock tumbled by double digits in the previous two results as it suffered weak revenue growth and inventory issues.

Therefore, these results will be important because they will provide more information about the state of the company. They will also let investors see whether the company is solving its challenges as the management has promised.

There is a sense of hope that Estee Lauder will publish encouraging results. For one, its stock has already rebounded by over 30% from its lowest point in November last year. Analysts expect that Estee Lauder’s revenue will come in at $4.25 billion, a decline from the $4.6 billion it made in the same quarter a year earlier. 

This revenue will be better than the $3.52 billion it made in the third quarter because of seasonal reasons. Estee Lauder has beaten analysts’ estimates in three of the past four financial results.

The company is facing several challenges. The most important is that Asia, one of its key markets, has started to slow down. Most of this slowdown is happening in China, where demand for prestige beauty products is slowing.

Estee Lauder is also struggling because of its travel business where organic sales plunged by 51%. Therefore, these results will give investors more color about the state of its Chinese business and inventory build.

Another issue facing Estee Lauder is that competition in the industry has jumped, with most customers opting for cheaper-but-good products from the likes of ELF. ELF stock has already jumped by more than 152% in the past 12 months, giving it a market cap of over $9.36 billion. It is also seeing competition from L’Oreal.

Most importantly, the management will likely be taken to task about the family wrangles that have led to tensions.

EL chart by TradingView

It is always difficult or even impossible to predict where a stock will move to ahead of its earnings. In Estee Lauder’s case, it is possible that the shares will jump if the company publishes encouraging financial results.

Turning to the daily chart, we see that the stock’s recovery found a strong resistance at $150.50 in January. This performance happened as investors waited for the upcoming earnings. It remains below the 50-day and 100-day Exponential Moving Averages (EMA). 

Therefore, the outlook for the stock is bearish, with the key target to watch being last year’s low of $101.7. The alternative scenario is where the shares rebounds and moved above the YTD high of $150.50.

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