We came across a bullish thesis on The Estée Lauder Companies Inc. on Becoming Berkshire’s Substack. In this article, we will summarize the bulls’ thesis on EL. The Estée Lauder Companies Inc.’s share was trading at $112.92 as of February 25th. EL’s trailing and forward P/E were 80.96 and 43.67, respectively according to Yahoo Finance.
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Estée Lauder Companies Inc. (EL) is a global leader in prestige beauty, managing over 20 brands across skincare, makeup, fragrance, and hair care, and distributing products in roughly 150 countries through wholesale, travel retail, e-commerce, and direct-to-consumer channels. Skincare, the company’s crown jewel representing nearly half of total sales, fell 12% in 2025 due to weak retail performance in China and travel retail, which historically attracts high-spending international consumers.
Makeup sales declined mid-single digits, driven by retail softness and inventory destocking, while fragrance remained flat. Overall, EL reported an 8% sales decline and a dramatic swing from $970 million operating profit in 2024 to a $785 million loss in 2025, amplified by a $481 million restructuring charge and $1.2 billion in impairment charges. These actions were part of the company’s Profit Recovery and Growth Plan (PRGP), aimed at streamlining operations, exiting lower-margin travel retail, and optimizing workforce and supply chain structures.
Despite these challenges, gross margins improved to 74%, and the company generated $670 million in free cash flow, reflecting underlying cash generation capability. Balance sheet pressures remain, with $7.3 billion total debt and $4.4 billion net debt, though cash reserves of $2.9 billion provide some flexibility. Looking ahead, EL’s turnaround depends on stabilizing China demand, recovering top-line sales, and successfully implementing operational efficiencies.
If margins normalize and travel retail recovers, long-term EBITDA could approach prior highs, supporting a fair valuation in the $180–$185 range and potential low-double-digit IRRs, while free cash flow generation offers resilience even amid ongoing global and cyclical headwinds.
Previously, we covered a bullish thesis on The Estée Lauder Companies Inc. (EL) by D Invests in February 2025, which highlighted the company’s strong brand pricing power, margin improvement, and turnaround strategy amid travel retail and China challenges. EL’s stock price has appreciated by approximately 64.39% since our coverage. D Invests shares an identical view but emphasizes the “Beauty Reimagined” strategy and operational restructuring as key drivers.
The Estée Lauder Companies Inc. is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 45 hedge fund portfolios held EL at the end of the third quarter which was 48 in the previous quarter. While we acknowledge the risk and potential of EL as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than EL and that has 10,000% upside potential, check out our report about this cheapest AI stock.
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Disclosure: None.
