We recently compiled a list of the 10 Best Hair Care Stocks To Buy Now. In this article, we are going to take a look at where Estée Lauder Companies Inc. (NYSE:EL) stands against the other hair care stocks.
According to Fortune Business Insights, in 2023, the hair care industry was estimated to be worth $99.52 billion globally. Between 2024 and 2032, the market is projected to expand at a CAGR of 10.4% from $106.91 billion to $213.47 billion. In 2023, Europe held a 36.43% market share, leading the hair care industry.
The demand for hair care products has increased as a result of the growing acceptance of longer hairstyles by males and the growing popularity of hair coloring. According to a survey conducted in 2020 by Garnier, 42% of 2,000 Americans discovered new techniques for dyeing their gray hair. Secondly, an increasing number of consumers are dealing with hair problems such as dandruff, graying hair, and hair loss, which will likely lead to a rise in the use of hairdressing products. According to survey results released in January 2022 by the Dermatology & Cutaneous Surgery Institute (DCSI), over two-thirds of Americans over the age of 35 experience issues with hair thinning and loss. Furthermore, the World Health Organization (WHO) released estimates showing that 30% of Japanese people were over 60 in 2020. Thirdly, there is an increasing emphasis on the development of organic and natural products to meet rising product demand. For example, Australian scalp care brand Straand made its UK debut in November 2023. To create product distinctiveness in the very competitive market, the company concentrates on creating cruelty-free and microbiome-centric products.
Specifically, as we have mentioned in our article, “20 Cheap Alternatives to Aveda Shampoo,” the global luxury hair care market was dominated by the luxury shampoo segment, which held a revenue share of approximately 30.5% in 2023.
According to a Cirana report, sales of hair products in the prestige market rose by 10% YoY in the first half of 2024, based on dollars, with styling and treatments showing the fastest rate of growth within the category. The trend of premiumization is still driving growth; three times as many hair products as lower-priced items have been added in the last three years, and these products now make up 25% of the category’s unit sales, compared with 15% just three years ago. Being the only beauty category where the bulk of sales takes place online, the premium hair market also makes for an intriguing channel tale. In fact, with double-digit growth in sales, the e-commerce channel is not slowing down at all.
One hair care product that is gaining popularity is dry shampoo. As we have stated in our article, “11 Dry Shampoo Alternatives for Every Hair Color and Type,” the dry shampoo market is expected to grow from $5.35 billion in 2023 to a valuation of $9.18 billion in 2030.
As we look ahead, Frost & Sullivan’s report reveals that the hair care market is changing due to disruptive technology like artificial intelligence, customized solutions, and innovative ingredients. The “skinification” movement places a strong emphasis on scalp health, which is driving businesses to use regenerative medicine and useful components like biotin and peptides. Personalized care is improved via IoT-enabled grooming products and AI-powered scalp analysis technologies. Companies are adopting waterless products, recyclable packaging, and a reduction in toxic chemicals as a significant priority in sustainability. Companies that want to satisfy changing customer preferences and lessen their environmental effect must promote scalp health and integrate next-generation technologies. These developments spur expansion and help brands maintain their competitiveness in a market that is changing quickly.
Benoit Butruille, Growth Expert and Principal Consultant, TechVision at Frost & Sullivan, stated:
“Hair and scalp care is booming, and it is of great interest to understand the innovations and strategies driving this growth. Technologies such as AI are being used to develop smart hair care devices. Additionally, sustainable practices are becoming increasingly important as more customers seek products made with ethically sourced, eco-friendly ingredients.”
Methodology:
We sifted through holdings of hair care ETFs and online rankings to form an initial list of 20 hair care stocks. Then we selected the 10 stocks that were the most popular among institutional investors. The stocks are ranked in ascending order of the number of hedge funds that have stakes in them, as of Q2 2024.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points. (see more details here)
A close-up of a makeup artist carefully applying Makeup Products to an clients face.
Estée Lauder Companies Inc. (NYSE:EL)
Number of Hedge Fund Investors: 47
Estée Lauder Companies Inc. (NYSE:EL), a market leader in the luxury beauty industry globally, provides best-selling brands such as Aveda, Bobbi Brown, Clinique, M.A.C., La Mer, Jo Malone London, and Origins.
The company is involved in the following categories: makeup (29%), skin care (51% of Q2 2024 sales), fragrance (16%), and hair care (4%). The Ordinary, Aveda, and Bumble and Bumble are its haircare brands.
The beauty behemoth’s revenue is split as follows, despite having operations in over 150 countries: 30% are from the Americas, 39% from Europe, the Middle East, and Africa (including retail travel), and 31% from Asia-Pacific.
Leading provider of luxury cosmetics, skincare, and perfumes, Estée Lauder Companies Inc. (NYSE:EL) has reinforced its competitive position against industry leaders and kept its standing as a preferred seller on physical and digital channels. These qualities should guarantee a long-term competitive advantage that enables the company to produce excess returns for more than 20 years, in addition to scale-based cost advantages.
Despite seeing mixed outcomes at the end of the 2024 fiscal year, the beauty giant’s adjusted earnings and revenue exceeded projections. The company suffered diminishing demand in China and North America amid a surge in sales of skincare products, and CEO Fabrizio Freda announced his resignation at the end of the fiscal year 2025.
Aveda in North America was the main cause of the 4% fall in Hair Care net sales in 2024 FY, which was a reflection of softness in the salon channel and the company’s direct-to-consumer distribution channels. Operating results for the hair care industry fell, mostly due to a drop in net sales, which was somewhat mitigated by strict cost control.
D.A. Davidson analyst Linda Bolton Weiser maintained a Buy rating on Estée Lauder with a $130 price target despite the recent declines in Chinese and travel retail sales. She noted a possible rebound from inventory worries as well as favorable long-term prospects.
The company has hedge fund sentiments of 47 in Q2 2024. Ken Griffin’s Citadel Investment Group is the largest shareholder in the company, with 3,037,570 shares worth $323.20 million.
Overall EL ranks 4th on our list of the best hair care stocks to buy. While we acknowledge the potential of EL as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than EL but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
