Goldman Sachs has raised its rating on Estee Lauder's stock. Why does he believe in their growth?

Goldman Sachs has upgraded the shares of luxury cosmetics maker Estee Lauder: it now advises buying them and expects the price to increase by about a third. According to the bank, the company is coming out of a prolonged period of weak results, its strategy to change the business is beginning to bear fruit, and an additional source of growth could be a recovery in demand in mainland China and the expansion of trade on fast-growing online platforms, including Amazon.

Goldman Sachs believes that Estee Lauder has successfully coped with difficulties, and investors should pay attention to its shares, writes CNBC. The bank upgraded the securities from "Hold" (Hold) to "Buy" (Buy) and increased the target price to $115 per share, which implies growth of about 31% from the closing level on Friday, October 10.

"We estimate the business could return to revenue growth as early as the first quarter [of the fiscal year] (ended September), followed by a return to double-digit EBIT (earnings before interest and taxes. - Oninvest) margins in fiscal 2027 and beyond," Goldman Sachs analyst Bonnie Herzog wrote.

Estee Lauder shares were up about 8.4% in trading on Monday, October 13th. They have added more than 23% since the start of 2025.

Goldman expects a turnaround in Estee Lauder's business as a result of the strategic initiatives the company is pursuing, Herzog explained.

"The strategy is based on a consumer-focused approach and an emphasis on bringing relevant new products to market more quickly, which should make the company more flexible. It is the lack of this flexibility that analysts believe has been one of the main reasons for the weak results of recent years," she said.

According to Herzog, the return to growth in mainland China should also support Estee Lauder shares. The company's management noted the first signs of improvement in this market back in June, after the publication of the statements. This effect, according to the analyst, can be strengthened by diversification of business to other developing markets in Asia.

Herzog also praised the company's efforts to expand its presence in high-growth sales channels, including specialty cosmetics retailers and brand launches with Amazon and TikTok Shop.

"Importantly, management views these platforms as a key element of the new media strategy, where they fulfill the function of strengthening demand for the company's brands, as most consumers search for cosmetics on these platforms," she wrote.

Herzog noted that the updated target price suggests: Estee Lauder shares are now undervalued. According to her calculations, the securities are trading at about 18 times the company's EV/EBITDA (earnings before interest, taxes, depreciation and amortization) ratio, while over the past five years the ratio has averaged about 24.

"We believe Estee Lauder is earning noticeably less compared to fiscal 2019, although revenue volume remained roughly the same," she said.

Deutsche Bank slightly increased the target price of Estee Lauder shares (from $100 to $103), MarketScreener reported on October 13. Deutsche Bank also maintained its recommendation to buy the company's securities (Buy). Its assessment assumes the potential growth of shares by 17%.

Estee Lauder stock has a total of 27 ratings from analysts, MarketWatch shows. Most advise Hold (16 Hold ratings), with eight recommending Buy (seven Buy and one Overweight) and two recommending Sell (one Underweight and one Sell).

This article was AI-translated and verified by a human editor