Initially, cosmetics giant Estee Lauder (NYSE:EL) might not appear as a compelling investment opportunity. With soft performances in the market and a ho-hum earnings report recently, EL stock seems challenged. However, social normalization trends (people returning to offices, going out more, etc.) stand poised to boost Estee Lauder above the muck. Therefore, I am bullish on the beauty care company.
From the company’s most recent fiscal second-quarter earnings report, investors would be forgiven for doubting the viability of EL stock. Primarily, the company reported net sales of $4.62 billion, a decline of 17% from $5.54 billion in the year-ago period. Also, organic net sales fell 11%, according to Estee Lauder’s accompanying press release.
“In the fiscal 2023 second quarter, the evolution of the COVID-19 environment, including restrictions in mainland China and the rising number of COVID cases (collectively “COVID-related impacts”), led to stronger headwinds as the quarter progressed,” management declared.
As a result, the company stated that “tourism and product shipments to Hainan remained largely curtailed and traffic in brick-and-mortar in the rest of China was limited. These challenges were partially offset by broad-based strong organic net sales growth across developed and emerging markets globally.”
Encouragingly for EL stock, however, the underlying enterprise recently represented a highlight for unusual stock options volume. Specifically, following the close of the March 9 session, options volume for Estee Lauder reached 14,715 contracts, which was 452% higher than the trailing one-month average volume.
Significantly, call volume (which has bullish implications) hit 14,373 contracts against put volume of only 342. Options aside, though, the fundamental catalyst of social normalization trends may lift EL stock higher, going forward.
Bolstering the bull case as well, on TipRanks, EL stock has an 8 out of 10 Smart Score rating. This indicates strong potential for the stock to outperform the broader market.
EL Stock May Rise on the Return of Business as Usual
During the worst of the COVID-19 crisis, the fundamental narrative for Estee Lauder wasn’t particularly attractive. Obviously, the fear of coming into contact with the SARS-CoV-2 virus kept people socially distanced and isolated. That’s not a great framework for EL stock. As well, mass-scale remote operations mostly reduced the incentive to…
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