The article discusses the decision to buy 50 shares of Estee Lauder at around $139 per share, which will increase Jim Cramer’s Charitable Trust’s ownership of the company to 475 shares and raise its weighting to 2.1%. This decision comes after a period of patience regarding adding to Estee Lauder, as the company had awaited confidence in normalized inventories in China and the travel retail channel. Analysts at Deutsche Bank made a bullish call on Estee Lauder, naming it a “Catalyst Call: Buy Idea” and pointing to a positive setup into earnings on May 1. Despite potential challenges, Deutsche Bank believes the company will report positive results and commentary that could drive the stock price higher.
Deutsche Bank expects Estee Lauder to report in-line to better-than-expected results versus Wall Street estimates, with a potential tweak due to a strong dollar. The company is also working on its Profit Recovery Plan, which aims to increase operating profit by $1.1 billion to $1.4 billion and is expected to be completed by the end of fiscal 2026. The results and commentary following the earnings announcement are anticipated to surpass market fears and potentially boost the stock price. However, there are still long-term questions about category demand and execution that need to be addressed, leading to a cautious investment approach with a small buy on Estee Lauder.
The company’s embrace of online platforms like Amazon and efforts to expand consumer reach are positive steps in the right direction. The current bull-versus-bear debate revolves around the multiple at which the stock should trade on earnings per share over time. While the bulls argue for a 30-times earnings multiple as the company starts its recovery, the bears are more conservative at around 20. The article takes a more bullish stance on the stock, with a price target of $162 based on a 27 multiple of earnings. This strategy aligns with the investing discipline of putting money to work in the market when it is oversold, which was the case following a decline in the market.
Overall, the decision to buy Estee Lauder shares is based on a combination of factors, including a positive outlook from Deutsche Bank, the company’s Profit Recovery Plan, and efforts to expand its reach through online platforms. Despite potential challenges, the market seems poised to react positively to the company’s upcoming earnings announcement, which could result in a stronger move higher in the stock price. This buy falls in line with the investing club’s approach to opportunistic buying in oversold market conditions, and is part of a broader strategy of carefully evaluating investment opportunities for Jim Cramer’s Charitable Trust.
