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Adam Lawrence
Adam Lawrence
Articles (27) 

4 Cosmetic Stocks That Could Have Investors Sitting Pretty This Year

Joey New York, Estee Lauder, Coty, Nu Skin are appealing investment opportunities

Turn on the television, open a magazine, listen to the radio or even drive past a bus and chances are you are going to catch an advertisement for some sort of cosmetic or anti-aging product or service. It is not just by chance you are frequently exposed to the beauty industry.

Currently, non-invasive cosmetics are a hot item. In fact, the market for facial injectables across North America has been flourishing in an environment of growing preference for minimally invasive surgeries. And the potential for growth in the near term is impressive.

There are many companies out there that do offer options to customers, but there are fewer companies that allow investors to gain direct exposure to the cosmetic and cosmaceutical companies themselves. This, in turn, could offer a true advantage for those paying close attention to this market right now.

Joey New York Inc. (JOEY), for example, has built a business model that has been proven time and time again, and chances are you have seen this model in your city already. Have you heard of Massage Envy or DryBar? These private companies are raking in money by focusing on their businesses’ main offering and expanding that model through multiple locations across the country.

Now, because of the growing inclination toward minimally invasive procedures in dermatological applications, the overall market is expected see huge potential ahead. The growing focus on aesthetics and physical attractiveness are proving to be the persuasive factors in the propelling demand for facial injectables in North America.

Changing lifestyles, rising disposable incomes and altering understanding of beauty and attractiveness is encouraging several users to opt for facial injectables that can reverse the signs of aging to restore the youthful glow.

According to a report from Zion Market Research, the global anti-aging market was valued at $140.3 billion in 2015, is expected to reach $216.52 billion in 2021 and is anticipated to grow at a compound annual growth rate of 7.5% between 2016 and 2021.

Obviously, an increasing aging population worldwide is a major driving factor for the anti-aging market. Strict regulations have led to the introduction of safe and efficient anti-aging products and services, which are expected to drive the anti-aging market in the near future.

So it makes sense cosmetic companies are pushing toward addressing this growing market. Take The Estée Lauder Companies Inc. (NYSE:EL), for instance. The company has seen is stock prices increase since May, when it released strong sales and earnings gains along with positive forecasts for the year.

But it does not just end with earnings earlier this year. Most recently, the company announced the launch of a conversational lipstick advisor that helps guide customers to find their ideal lip shade.

This may be one of the first steps for any cosmetic company to directly engage with its customer base. By using the ModiFace platform, for example, those chatting with the new Lipstick Advisor chat bot can try on different shades of lipstick in a simplistic and very realistic environment.

"One of the key pillars of our partnership with ModiFace is the application of Augmented Reality and AI across all platforms where customers interact with our brand," Stephane de La Faverie, Estée Lauder's global brand president, said.

Increasing consumer demand for anti-aging products and technology of advancement in anti-aging services are the factors fostering the growth of this market.

To this end, Coty Inc. (NYSE:COTY), one of the world’s largest beauty companies with approximately $9 billion in revenue, is focused on prestige fragrances and skin care through various brands. These brands, which include Calvin Klein, Marc Jacobs, Hugo Boss (XTER:BOSS) and Gucci, are similar to may others in the industry. While Coty has seen a mixed market over the last six months, shares of the beauty company took a bullish turn in July.

Since hitting lows of $18.04, Coty rebounded to as high as $20.88 on July 28. This posted a new high for the year. In fact, shares of Coty have not traded this high since November of 2016. The company is slated to release fiscal fourth-quarter 2017 financial results before the market opens on Aug. 22.

Now consider this: The global cosmetic market was $460 billion in 2014 and is estimated to reach $675 billion by 2020, growing at a rate of 6.4%. Of the cosmetic products, skin care has the highest market share while oral cosmetics would be the fasteset-growing market during the forecasted period.

Continued growth and strong business on a global scale are two key components to companies like this. Nu Skin Enterprises Inc. (NYSE:NUS) shares have been on the rebound since its pullback in February after shares stumbled to a low of $47.10. On July 25, shares hit a yearly high of $65.85, up nearly 40% since hitting the February low.

The company will release second-quarter 2017 results after the market closes on Aug. 2. The Nu Skin management team will host a conference call with the investment community later that same day.

For 2017, Nu Skin projected a net earnings increase between $3.10 and $3.25. This represents more than 20% growth compared to last year. The positive earnings and increasing cash allowed the company to raise dividends from 80 cents in 2012 to $1.42 in 2016. But what many investors may be looking at now is the opportunity Nu Skin presents in Asia. Roughly 80% of the company's sales were captured there in the first quarter.

Conclusion

There is no doubt the growth numbers for the niche markets of the cosmetic industry support future growth potential. Many will find that a foothold for some of these companies will be diversification across products and services. Others will need to find a way to diversify across global markets in order to gain a competitive advantage. But all said, the second half of the year is growing near and with that will come the boom in the back-to-school and holiday seasons. These times of the year traditionally see retail shopping intensify. And if there is expendable cash, customers will look to spend it on luxury items like cosmetics and cosmetic services.

Disclaimer: The author owns ZERO shares in any companies mentioned within this article. The author is affiliated with MIDAM VENTURES LLC a company which has an exisiting marketing & awareness contract with Joey New York Inc. (JOEY) to provide marketing & awareness . The author has not been compensated to write this article.


Rating: 4.3/5 (3 votes)

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