Is Estée Lauder a Buy, Sell, or Hold in 2025?

Estée Lauder (NYSE: EL) might be known as a timeless brand in cosmetics, founded nearly 80 years ago, but lately, it's looking like the skincare and makeup giant is running out of time.

The stock is down a whopping 78% from its peak during the pandemic, as a combination of weakness in China, market share losses to fast-growing rivals like e.l.f. Beauty, and falling profit margins, have combined to send the stock spiraling.

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However, with 2025 well underway, is there hope for a recovery in the cosmetics stock? Let's take a look at the buy, sell, and hold cases for Estée Lauder stock.

Image source: Getty Images.

Buy Estée Lauder stock

Estée Lauder's struggles are evident, but turnaround efforts are in the works. The company launched its Profit Recovery and Growth Plan last year. Its goal is to improve profit margins in fiscal 2025, which is now underway, and fiscal 2026. In particular, management is aiming to improve gross margin and cut operating costs, with a target of $800 million to $1 billion in incremental operating profit improvement.

Thus far, the plan does seem to be achieving some margin improvement, though sales are still falling. In the fiscal first quarter, which ended in September, gross margin improved from 69.6% to 72.4% as it reduced its cost of sales by 13%.

Its adjusted earnings per share rose from $0.11 to $0.14, though the company did reduce its dividend, a sign that the recovery may take longer and be more costly than expected.

The other main buy argument for Estée Lauder is that the stock is trading at a deep discount to its previous levels. While it might not return to those heights, there is significant room for recovery if the recovery plan gains traction and China bounces back, which it has yet to do.

Sell Estée Lauder stock

Selling Estée Lauder makes sense based on the premise that the business is structurally broken and the China market is not coming back.

The Chinese economy has been in a malaise since 2022 due to the impacts of the pandemic and a weak recovery, including in consumer spending. Estée Lauder said revenue fell 11% in the Asia-Pacific region in the fiscal first quarter and dropped even further in China.

Additionally, Estée Lauder is losing market share to more nimble competitors like e.l.f. Beauty, and department stores, a traditional mainstay in the cosmetics retail and close partner of Estée Lauder, have lost market share to more nimble retailers like Sephora and online storefronts.

With China down and millennials seeming to prefer other brands, it's likely to be difficult for Estée Lauder to regain its lost market share.

Hold Estée Lauder stock

Estée Lauder seems like a good candidate for a wait-and-see approach, considering that the company's turnaround plan is still being implemented and the China situation remains fluid.

At this point, the geopolitical environment is also a factor, as tariffs and a strong dollar are likely to put pressure on multinational companies like Estée Lauder, though it's unclear how tariffs will play out.

Additionally, while the stock may not be cheap, given how far its profits have fallen, selling now would eliminate any chance of benefiting from a rebound.

What's the verdict?

Estée Lauder's turnaround doesn't seem like it's going to come so easily, but I still think this is a stock worth holding.

The company has a wide range of well-known brands under its umbrella, including Clinique, Aveda, and MAC, and demand for luxury beauty should improve over the long term as consumer spending recovers and inflation cools.

Investors will have to be patient, as profits are suppressed right now, but giving up on a stalwart like Estée Lauder when it's so far down seems like a mistake.

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Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends e.l.f. Beauty. The Motley Fool has a disclosure policy.