HSBC sees ‘misplaced hope’ about Estee Lauder, downgrades to Hold

HSBC downgraded Estee Lauder to Hold from Buy with a price target of $100, down from $130. The firm’s recent trip to Greater China, including Hong Kong and Shanghai, left it with “a blunt assessment of the situation on luxury” and since then there has been a warning from Coty (COTY) on slower growth in the U.S. and China and a miss from LVMH (LVMUY) on its beauty division, all of which point to “excessive optimism” and “misplaced hope” about Estee Lauder, the analyst tells investors. The firm now takes the view that the implementation of the cost-cutting program implies that the replacement of Estee Lauder’s CEO “can only be internal” as it argues that if an external candidate had been locked in, the market “would have heard about it by now.” Given that view, the firm is “not expecting the shake-up that we believe is needed,” the analyst added.