Estee Lauder Falls as Stock Is Downgraded Because of Coronavirus

Estee Lauder's higher margin travel-retail segment will be under pressure as travel becomes more restricted because of the outbreak of the coronavirus.
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Shares of Estee Lauder (EL) - Get Report were down sharply Monday after analysts at Oppenheimer lowered their rating on the stock as part of the fallout from the coronavirus that has infected nearly 3,000 people.

The firm downgraded the beauty supply maker to perform from outperform while also lowering its price target to $210 from $230. The price target represents a just a potential 2.3% upside from the stock’s closing price Friday of $205.34.

Analyst Rupesh Parikh cited “recent developments in China with the coronavirus coupled with the premium valuation at which shares trade.”

The issue is Estee Lauder’s higher margin travel-retail segment could experience a negative impact from the outbreak of the virus. The impact is expected to affect the third quarter, and possibly more.

Estee Lauder shares were falling 3.73% to $197.68 on Monday. 

More than 2,800 confirmed cases of the virus have been found in China with neighboring countries in South East Asia also experiencing a handful of infections each. There have been five cases confirmed in the United States.

So far 81 people have died from the coronavirus.

About a week ago the mysterious respiratory virus, which is believed to have originated in Wuhan, a city of about 11 million, had infected about 52 people. That number has quintupled in the week since.

The biggest fear from the coronavirus is the contraction of deadly pneumonia.

“The U.S. Centers for Disease Control and Prevention continues to closely monitor an outbreak” of the virus, according to the health agency.

The first cases are believed to have occurred in December and have been linked to a large seafood and animal market, according to the CDC. The 2019-nCoV virus has been likened to the deadly Middle Eastern Respiratory Syndrome virus and the Severe Acute Respiratory Syndrome virus.