The Estee Lauder Companies Inc. (EL): A Bull Case Theory

We came across a bullish thesis on The Estée Lauder Companies Inc. on 2x2 Capital’s Substack by Maaiz Khan. In this article, we will summarize the bulls’ thesis on EL. The Estée Lauder Companies Inc.'s share was trading at $86.10 as of July 15^th. EL’s trailing and forward P/E were 80.96 and 37.59 respectively according to Yahoo Finance.

Estée Lauder (EL), down over 80% from its peak of $350 to $69, is showing signs of a potential turnaround. Despite its decline, it's the only remaining stock in Michael Burry’s 13F portfolio, and recent activity—such as sizable January 2027 $110 call purchases and insider buying near current levels—suggests renewed investor confidence.

EL owns a strong portfolio of globally recognized brands, many of which are still growing double digits in the U.S., underscoring enduring brand equity despite recent headwinds. The sharp decline since 2022 stems from demand shocks in China and travel retail, inventory overbuild, and a rigid cost structure exacerbated by underperforming legacy brands.

However, the company is pivoting by rebalancing its channel mix away from travel retail, focusing on core brand execution—particularly La Mer, The Ordinary, and Le Labo—and implementing margin recovery through the PRGP cost-cutting program. FY2025 is expected to mark the trough, with a recovery from FY2026 onward driven by volume resurgence rather than further cuts.

Although Q4 may show further weakness, management anticipates growth resuming in FY2026 as inventory destocking completes. If volumes recover, operating income could more than double from current trough levels of $1.58B back to prior peaks above $3.5B. Notably, EL trades at a 25% discount to peer L'Oréal even at depressed earnings, suggesting significant re-rating potential. With travel retail now just 13% of sales (down from 30%) and margin expansion already visible, the turnaround appears credible. An options strategy—buying Jan 2027 $110 calls and selling $50 puts—offers asymmetric upside with limited downside exposure.

Previously we covered a bullish thesis on The Estée Lauder Companies Inc. by Alexandru Dragut in February 2025, which highlighted its “Beauty Reimagined” strategy, digital expansion, and cost cuts. The company's stock price has appreciated approximately by 15% since our coverage. The thesis still stands as execution remains critical. Maaiz Khan shares a similar view but emphasizes valuation dislocation and options-based upside.

The Estée Lauder Companies Inc. is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 49 hedge fund portfolios held EL at the end of the first quarter which was 45 in the previous quarter. While we acknowledge the potential of EL as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.

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Disclosure: None.