Estee Lauder: Citigroup Downgrades to Neutral From Buy

Estee Lauder Shares Fall After Citigroup Downgrade

Shares of Estee Lauder (EL) fell 2.5% in premarket trading on Tuesday after Citigroup downgraded the stock to Neutral from Buy. Citigroup analyst Wendy Nicholson lowered her price target on the stock to $300 from $340, citing concerns about the company's ability to maintain its growth momentum in the face of rising costs and competition.

Downgrade Based on Margin Pressures, Competition

In a note to clients, Nicholson wrote that she is "increasingly concerned about Estee Lauder's ability to maintain its high margins in the face of rising input costs and competition from both mass-market and luxury brands." She also noted that the company's recent acquisition of Tom Ford Beauty is likely to weigh on its earnings in the near term.

Estee Lauder Faces Challenges in China

Estee Lauder has also been facing challenges in China, its largest market. The company's sales in China have been hurt by the country's zero-COVID policy, which has led to lockdowns and travel restrictions. Nicholson said that she expects Estee Lauder's sales in China to remain weak in the near term.

Analysts Remain Cautious

Other analysts have also expressed caution about Estee Lauder's prospects. In a recent note to clients, Morgan Stanley analyst Dara Mohsenian wrote that she is "neutral" on the stock, citing concerns about the company's valuation and its ability to maintain its growth momentum.

Estee Lauder Stock Performance

Estee Lauder shares have underperformed the broader market in recent months. The stock is down about 20% year-to-date, compared to a gain of about 10% for the S&P 500 index.

Conclusion

Citigroup's downgrade of Estee Lauder is a sign of the challenges that the company is facing. The company's ability to maintain its growth momentum in the face of rising costs and competition is a major concern for investors. Estee Lauder shares are likely to remain under pressure in the near term.