We recently compiled a list of the “10 Best Hair Care Stocks to Buy Now,” and in this article we’ll take a look at how The Estee Lauder Companies Inc. (NYSE:EL) stands up against other hair care stocks.
According to Fortune Business Insights, the hair care industry is estimated to be worth $99.52 billion worldwide in 2023. The market is projected to expand at a CAGR of 10.4% from $106.91 billion to $213.47 billion from 2024 to 2032. Europe led the hair care industry in 2023 with a market share of 36.43%.
The growing acceptance of longer hairstyles for men and the growing popularity of hair coloring have resulted in an increased demand for hair care products. According to a survey conducted by Garnier in 2020, 42% of 2,000 Americans discovered new ways to dye their gray hair. Secondly, an increasing number of consumers are experiencing hair problems such as dandruff, gray hair, and hair loss, which may lead to an increase in the use of hair styling products. According to survey results released in January 2022 by the Dermatology and Cutaneous Surgery Institute (DCSI), more than two-thirds of Americans over the age of 35 suffer from thinning hair and hair loss. In addition, the World Health Organization (WHO) released estimates showing that 30% of Japanese people were over 60 years old in 2020. Thirdly, there is an increasing focus on the development of organic and natural products to meet the growing product demand. For example, Australian scalp care brand Straand entered the UK in November 2023. To differentiate its products in a highly competitive market, the company is committed to developing cruelty-free and microbiome-focused products.
Specifically, as mentioned in our article “20 Cheap Alternatives to Aveda Shampoo”, the global luxury hair care market is dominated by the luxury shampoo segment, with a revenue share of around 30.5% in 2023.
According to a Cirana report, luxury haircare sales will grow 10% year-over-year in dollar terms in the first half of 2024, with styling and treatment seeing the highest growth in the category. Premiumization trends are still driving growth, with three times as many haircare products added over the past three years as lower-priced items, and these products now account for 25% of the category’s unit sales, up from 15% just three years ago. As the only beauty category where the majority of sales are made online, the luxury haircare market also makes for an interesting channel story. In fact, the e-commerce channel, with sales growing in double digits, isn’t slowing down at all.
The story continues
One hair care product that is growing in popularity is dry shampoo. As mentioned 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 $9.18 billion by 2030.
Looking to the future, the hair care market is being transformed by disruptive technologies such as artificial intelligence, customized solutions, and innovative ingredients, according to a Frost & Sullivan report. The “skinfication” movement is placing emphasis on scalp health, leading companies to use regenerative medicine and beneficial ingredients such as biotin and peptides. Personalized care is being enhanced by IoT-enabled grooming products and AI-powered scalp analysis technologies. Companies are adopting waterless products, recyclable packaging, and reduced toxic chemicals as key sustainability priorities. Companies that want to meet changing customer preferences and reduce their environmental impact must promote scalp health and integrate next-generation technologies. These developments will fuel expansion and help brands stay competitive in a rapidly changing market.
“The number of companies that are looking to expand their presence in the digital space is on the rise,” said Benoit Boutouril, growth expert and principal consultant, TechVision, Frost & Sullivan.
“Hair and scalp care is growing rapidly, and understanding the innovations and strategies driving this growth is of great interest. Technologies such as AI are being used to develop smart hair care devices. Additionally, sustainable practices are becoming increasingly important as more customers demand products made with ethically sourced and eco-friendly ingredients.”
Methodology:
We compiled an initial list of 20 hair care stocks by scouring hair care ETF holdings and online rankings. We then selected the 10 most popular stocks among institutional investors. These stocks are ranked by the number of hedge funds holding the stocks as of the second quarter of 2024.
Why are we interested in stocks that hedge funds are buying up? The reason is simple: our research shows that by mimicking the top holdings of the best hedge funds, we can outperform the market. Our quarterly newsletter strategy selects 14 small and large stocks each quarter, and has returned 275% since May 2014, beating the benchmark by 150 percentage points. (Learn more)
5 Quality Foundations for Every Skin Type
Close-up of a makeup artist carefully applying makeup product to a client’s face.
The Estée Lauder Companies Inc. (NYSE:EL)
Number of hedge fund investors: 47
The Estée Lauder Companies Inc. (NYSE:EL) is a market leader in global prestige beauty, offering best-selling brands such as Aveda, Bobbi Brown, Clinique, MAC, La Mer, Jo Malone London and Origins.
The company is involved in the categories of makeup (29%), skin care (51% of second quarter 2024 sales), fragrance (16%) and hair care (4%). The Ordinary, Aveda, Bumble and Bumble are the company’s hair care brands.
Despite the beauty giant operating in over 150 countries, its revenue is split as follows: Americas 30%, Europe, Middle East and Africa (including retail travel) 39%, and Asia Pacific 31%.
The Estée Lauder Companies (NYSE:EL), a leading provider of premium cosmetics, skincare, and fragrances, has strengthened its competitive position against industry leaders and maintained its preferred retailer position in both brick-and-mortar and digital channels. These qualities, in addition to cost advantages based on scale, should ensure a long-term competitive advantage that will generate excess returns for more than two decades.
The beauty giant beat expectations for adjusted profit and sales despite mixed results at the end of fiscal 2024. The company has been hit by weak demand in China and North America amid surging sales of skin-care products, and CEO Fabrizio Freda announced he will step down at the end of fiscal 2025.
Hair Care segment net sales declined 4% in fiscal 2024 primarily due to Aveda in North America, reflecting weakness in the salon channel and the company’s direct-to-consumer channel. Hair Care industry operating results declined primarily due to lower net sales, somewhat mitigated by tight cost controls.
DA Davidson analyst Linda Bolton Weiser maintained a buy recommendation and $130 price target on Estée Lauder despite recent sales declines in China and travel retail, citing a potential recovery from inventory concerns and favorable long-term prospects.
The company has a hedge fund sentiment rating of 47 for the second quarter of 2024. Ken Griffin’s Citadel Investment Group is the company’s largest shareholder, with 3,037,570 shares worth $323.2 million.
Overall, EL ranks #4 on our list of best hair care stocks. While we acknowledge EL’s potential as an investment, we believe some AI stocks have the potential to deliver higher returns in a shorter time frame. If you’re looking for AI stocks that are more promising than EL but still trade for less than 5x its earnings, check out our report on the cheapest AI stocks.
Read next: The $30 Trillion Opportunity: The 15 Best Humanoid Robot Stocks to Buy According to Morgan Stanley and NVIDIA Has “Become a Wasteland” According to Jim Cramer.
Disclosures: None. This article was originally published on Insider Monkey.
