Are you looking to make a smart investment in a well-known company like Estee Lauder? The global makeup giant has been undergoing some significant changes in the past few years, but could now be showing signs of a potential turnaround. As experts at Extreme Investor Network, we believe that Estee Lauder (EL) may offer a great investment opportunity for those looking to add exposure to their portfolio.
After hitting a peak in 2021, EL has experienced a steep decline, dropping over 70% to just under $100 by the end of last year. However, the stock has shown signs of bottoming out and has formed three successful higher lows, indicating a possible shift from a bearish to a bullish trend. With multiple attempts to break above $150, EL could be on its way to reaching the low $200s and potentially filling the gap up to $235.
Despite a seemingly high forward earnings ratio of 36 times, EL is expected to see impressive EPS growth rates of over 20% for this year and nearly 88% for next year. Additionally, with gross margins currently at 70%, EL is positioned well compared to its peers and historical valuations. At Extreme Investor Network, we see EL’s fair value aligning with the technical analysis around the $235 gap fill area.
In terms of options trading, the implied volatility rank for EL is at 31%, making options relatively expensive. As a strategy, we recommend selling options until EL breaks above $160, and then considering buying upside calls for a target price of $200. For example, you could sell the May $150/$140 Put Vertical @ $3.65 Credit, which involves selling May $150 Puts at $7.55 and buying May $140 Puts at $3.90. This strategy risks a total of $635 per contract if EL falls below $140 at expiration, but could potentially yield a profit of $365 per contract if EL stays above the $150 strike price.
At Extreme Investor Network, we understand the importance of making informed financial decisions. Our content is provided for informational purposes only and does not constitute financial, investment, tax, or legal advice. Before making any investment decisions, we recommend consulting with your own financial or investment advisor to ensure that our recommendations align with your unique circumstances. Click here for the full disclaimer. Join us at Extreme Investor Network for more expert insights and recommendations on investing in today’s market.
