#Morningstar #ContrarianInvesting #StockInvesting
These are two of the most undervalued wide-moat stocks that Morningstar’s analysts cover today.
00:00 Introduction
00:34 Estee Lauder EL
01:16 Esty ETSY
Susan Dziubinski: Hi. I’m Susan Dziubinski with Morningstar. 2024 was a great year for stock investors—and as a result, there are fewer undervalued stocks at the start of 2025 than there were at the start of last year.
But fear not, contrarians: There are still plenty of deeply unloved stocks for you to choose from as 2025 kicks off. In fact, today we’re looking at two of the most undervalued wide moat stocks that Morningstar’s analysts cover. We think there’s plenty of opportunity for patient, long-term investors in these unloved, high-quality names.
Our first stock for contrarians in 2025 is Estee Lauder EL. Admittedly, Estee Lauder is facing an uphill battle to revive growth amid weakness in China and travel retail. In fact, last quarter, the company slashed its dividend and withdrew its 2025 outlook due to limited visibility into when demand will recover. But Morningstar thinks the firm is moving in the right direction when it comes to product refreshment, digital initiatives and inventory management; we think these moves will allow Estee Lauder to reinforce its competitive position for the long term. We see a path to growth over the medium term as the macro backdrop brightens. We think Estee Lauder stock is worth $162.
Our next stock for contrarians to buy in 2025 is Esty ETSY. Etsy has endured a tough couple of years, as consumers have cut back on discretionary spending, and the largest e-commerce players have continued to consolidate market share. Then in early 2024, activist investor Elliot Management acquired a sizable stake in the company and earned a board seat, then in December, Etsy announced a flurry of leadership changes. Despite the drama, Morningstar thinks the market is badly underestimating Etsy’s ability to return to growth after a challenging few years of consumer spending. We see plenty of long-term upside from a series of initiatives, including gift mode, a loyalty program pilot, and the rollout of off-site advertising on social channels. We expect consumer spending on discretionary goods to improve toward the end of 2025, which should boost Etsy’s revenue. We think Etsy stock is worth $100.
For more stock ideas be sure to subscribe to Morningstar’s channel and visit Morningstar.com.
Morningstar senior analyst Sean Dunlop and analyst Dan Su provided the research behind this segment.
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Susan Dziubinski https://www.morningstar.com/people/susan-dziubinski
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