Wells Fargo (WFC) on Tuesday raised its price target on Club holding Estee Lauder (EL) to $225 from $215 on the back of an improvement in cosmetics- and duty-free imports to China, a crucial market for the makeup and skincare manufacturer. The Club found the fresh Chinese import data encouraging and welcomed the call from Wells Fargo, with Jim Cramer on Tuesday calling Estee Lauder the “single best play for the opening of China.” Imports of cosmetics to China in October improved month-on-month — though, still down by 6.1%, compared with a decline of 18.7% in September — and saw the best year-on-year trend since July, according to an analysis compiled by Wells Fargo analysts. Duty-free imports, meanwhile, turned positive last month, year-on-year, for the first time since April. The Wells Fargo analysts called the October cosmetics data a “significant” improvement. “If September is indicative of how EL’s China business closed the quarter, and October of how it climbed out, the trend in domestic China may well be improving sequentially,” the analysts wrote. Estee Lauder’s stock closed up Tuesday nearly 1%, at $207.89 a share. The stock has come under pressure this year as a result of China’s zero-Covid policy, high inflation and a strong U.S. dollar. China, whose economy has been significantly hampered for nearly 3 years due to Covid lockdowns, accounts for around 36% of Estee Lauder’s revenue. View from the Street There is a relatively broad consensus on Wall Street that Estee Lauder will remain squeezed by China’s draconian Covid measures in the short term, before revenue growth can again accelerate. And despite a flurry of recent reports suggesting Beijing could soon move to loosen Covid restrictions, the government has not made any formal announcements. But Wells Fargo analysts said the improved import data could support Estee Lauder’s stock. Shares were weighed down after the company issued a downbeat forecast for the rest of the fiscal year when reporting fiscal-first quarter results last week. “Data improvement, on top of an outlook we already see [as] conservative, could support a recovery in the stock ahead of [earnings-per-share], hence our target valuation” of $225 a share, the analysts wrote. Wells Fargo maintained its equivalent of a buy rating on Estee Lauder. Meanwhile, in a research note Monday, analysts at Credit Suisse argued there’s “no reason to think that the current stock pressures can’t be resolved by macro winds reversing.” The analysts added that Estee Lauder is “making the right decisions to maintain investments for the long term” in China. Credit Suisse maintained the equivalent of a buy rating and a price target of $215 a share. Analysts at Berenberg were more cautious, downgrading Estee Lauder to hold from buy on Friday, citing a lack of visibility on when macro pressures will ease. Berenberg also reduced their price target on Estee Lauder to $220 from $323. But the analysts said they, nonetheless, expect…
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