Investing Theory

Glamour & Growth: Investing in Beauty Industry Top Picks for 2024

October 12, 2023

Seeking top investment opportunities in the beauty industry for 2024? This guide zeroes in on the innovative trends and companies poised for success, focusing on investing in beauty industry top picks for 2024. With no-nonsense analysis, you’ll find out which players are likely to lead and what market segments to watch.

Unlock targeted insights into the stocks and strategies that stand out as smart investment choices for a profitable year ahead in the dynamic world of beauty.

Beauty Industry Investment Landscape

Encompassing skincare, fragrance, makeup, and haircare, the beauty industry is witnessing an impressive growth trajectory. With revenues of approximately $430 billion in 2022, the industry is expected to surge to about $580 billion by 2027. In the coming year, the projected growth rate of 6 percent a year outpaces many other consumer segments like apparel and pet care.

As consumers increasingly demand transparency and eco-friendly options, sustainable beauty initiatives and ‘free-from’ product claims are becoming more popular. This shift, coupled with Gen Z’s emphasis on product efficacy and societal issues, is reshaping the beauty market. Major retailers are also supporting this shift towards sustainable cosmetics, further bolstering the industry’s growth prospects.

In terms of geography, the beauty industry market, including the cosmetics market, is significantly influenced by the United States and China, with market sizes of $114 billion and $96 billion respectively, anticipated by 2027.

Meanwhile, emerging markets like the Middle East and India present new growth opportunities, especially in varying product categories and price tiers within the mass market. E-commerce, the fastest-growing sales channel for beauty products, is expected to grow at an annual rate of 12% from 2022 to 2027, further propelling the industry.

Nonetheless, the journey is not without challenges. The beauty industry faces challenges such as a stringent regulatory environment and market volatility, especially with the potential impact of inflation on consumer disposable income. Despite these hurdles, the beauty industry’s high profitability metrics, with operating income reflected in EBITDA margins reaching 30 percent, make it an attractive area for investors.

Niche Markets and Innovations Shaping Cosmetics Investments

Niche markets and innovations are shaping the future of beauty investments, extending beyond the traditional beauty landscape. One such niche is the global male grooming market, expected to grow to $115 billion by 2028.

This expansion is driven by shifts in masculinity and the influence of social media, leading to an increase in educated male consumers seeking tailored products.

The convergence of the wellness industry with beauty represents another significant trend, representing a near $2 trillion opportunity globally with a forecasted CAGR of 10 percent to 2027. This trend reflects the growing consumer demand for beauty products that not only enhance appearance but also contribute to overall health and wellbeing.

Personalized beauty products, including skin care and makeup, are another burgeoning trend. They reflect the consumer’s desire for individual customization and the increasing need for brands to cater to unique consumer needs.

Technological innovations are also shaping the cosmetics industry. Generative AI, skin longevity, and tech-based experiences like enhanced try-on tools stand among the top innovations set to impact the beauty brands. These innovations represent a new frontier for the beauty industry, offering exciting opportunities for investors.

Spotlight on Top-Performing Beauty Stocks

Certain cosmetic stocks that have managed to outperform and make a mark among the multitude of beauty brands include:

  • Estée Lauder Companies
  • Coty
  • L’Oréal
  • Ulta Beauty
  • Olaplex Holdings

These companies have shown strong growth, robust financial performance, and hold a strong foothold in the beauty market, consistently delivering a strong performance. Let's look at those brands more closely.

1. L’Oréal SA (EPA: OR)

Similarly, L’Oréal, with its global brands like Diesel, Giorgio Armani, and Yves Saint Laurent, has strengthened its international presence and diversified brand appeal.

Company, a global leader in the beauty and cosmetics industry, reported robust performance in its first-half financial results. The firm demonstrated resilience and adaptability in navigating market challenges, showcasing strong growth and strategic execution. During the second quarter of the year L'Oréal experienced a few positive momentums, achieving notable results in various product categories and geographic regions.

Top beauty stocks - L’Oréal: profit margin and estimated revenue and earnings; screen from the tool.

The company's ability to innovate, coupled with effective marketing strategies, contributed to its success in capturing consumer demand and maintaining a competitive edge in the dynamic beauty market. As a key player in the industry, L'Oréal's performance in the second quarter and first half reflects its commitment to delivering high-quality products and driving growth across its diverse portfolio.

2. Estee Lauder Companies Inc (NYSE: EL)

Estée Lauder, a prominent player in the premium and luxury beauty market, has made substantial inroads in the Asian market, especially in China. Company is a distinguished beauty and skincare firm, recognized for its excellence in producing top-tier skincare and beauty products.

This is the company with the longest history of those listed in this article, the same is a kind of brand-legend. Founded in 1946 by Estée Lauder and her husband Joseph Lauder, Estée Lauder Companies initially started as a small cosmetics company in New York City. Over the years, it has grown into a global beauty conglomerate, with a diverse portfolio of prestigious beauty brands.

With a steadfast commitment to skincare innovation, Estée Lauder in time has become a prominent name in the industry, offering a diverse range of beauty products that cater to the evolving needs of consumers worldwide.

Top beauty stocks - Estée Lauder: profit margin and consensus recommendations; screen from the tool.

The brand's dedication to quality and efficacy has made it a trusted choice for those seeking premium skincare and beauty cosmetics. From luxurious skincare formulations to a wide array of beauty products, Estée Lauder continues to set the standard for excellence in the realm of skincare and beauty. Their diverse portfolio, including La Mer, Bumble and Bumble, and Aveda, has further solidified their international presence.

However, you must note, that at the beginning of 2022 the company value started to decline - potential reasons for this situation could include challenges in the beauty and cosmetics industry due to changing consumer preferences, economic uncertainties impacting consumer spending, increased competition, or disruptions in the supply chain. It's essential to check the latest financial reports and market analyses for the most accurate and up-to-date information on the company's performance.

3. Coty Inc (NYSE: COTY)

Coty, another beauty industry titan, has witnessed robust growth, attributed to its strong brand portfolio and strategic takeovers. Company is one of strongest skin care market players that actively values the opinions expressed by consumers to stay attuned to evolving beauty trends. Notably, Coty completed the acquisition of several beauty and personal care brands from Procter & Gamble in 2016, significantly expanding its product offerings. Additionally, Coty acquired a majority stake in Kylie Cosmetics in 2019, securing a prominent position in the global beauty market.

With a keen focus on consumer insights, Coty strives to understand the diverse preferences and expectations of its audience.

Top beauty stocks - Coty: profit margin and consensus recommendations; screen from the tool.

This mentioned above commitment enables the company to consistently introduce innovative and trendsetting beauty products that resonate with the ever-changing dynamics of the beauty industry. By valuing consumer opinions, Coty positions itself as a forward-thinking brand, ensuring that its offerings align seamlessly with the latest beauty trends and cater to the diverse needs of its customer base.

4. Ulta Beauty Inc (NASDAQ: ULTA)

Ulta Beauty is a leading beauty retailer renowned for its extensive collection of beauty brands and a strong emphasis on skincare. With a commitment to providing a diverse array of products, Ulta Beauty has become a go-to destination for beauty enthusiasts seeking high-quality skincare options.

Company has set forth on various expansion initiatives, such as a strategic partnership with Target to open stores within their locations, indicating a confident growth trajectory.

Top beauty stocks - Ulta Beauty: profit margin and consensus recommendations; screen from the tool.

The retailer's curated selection spans a wide range of skincare products, offering customers access to premium and affordable options from various renowned beauty brands.

Ulta Beauty's dedication to offering a comprehensive range of skincare solutions reflects its mission to cater to the diverse needs and preferences of its clientele, establishing itself as a trusted hub for all things beauty and skincare.

5. Olaplex Holdings Inc (NASDAQ: OLPX)

Finally, Olaplex Holdings, despite being a relatively new entrant, demonstrates promising growth prospects. Their innovative haircare products have garnered significant consumer attention, positioning them as a top contender in the beauty stock landscape.

Olaplex Holdings is recognized for its innovative approach to hair care. As a company, Olaplex focuses on transforming the haircare business with its revolutionary products designed to repair and strengthen hair. Known for its breakthrough formulations, the company has gained widespread acclaim for addressing common hair concerns and delivering effective solutions.

Top beauty stocks - Olaplex: gross profit, margin, revenue and consensus recommendations; screen from the tool.

Olaplex Holdings has carved a niche for itself by creating products that resonate with consumers and professionals alike, establishing a strong presence in the competitive beauty market.

With a commitment to excellence and transformative haircare solutions, Olaplex continues to make a significant impact in the business of beauty.

However, you could notice a decline in Coty's stock value. It could include challenges in the beauty and cosmetics industry, such as shifting consumer preferences or increased competition. Economic uncertainties impacting consumer spending and disruptions in the supply chain could also contribute to a decrease in stock value. To understand the specific reasons for Coty's current performance, it's recommended to check the latest financial reports and market analyses.

Strategic Moves for Investors in the Cosmetics Space

Strategic decision-making becomes pivotal for investors interested in the beauty brands. Developing a well-rounded investment portfolio, incorporating various investment types such as:

  • individual company equities
  • beauty-related commodities
  • ETFs
  • REITs housing beauty retail

Another essential strategy involves global diversification, offering exposure to different consumer trends and economic conditions, enhancing the potential for higher returns with managed risk. Employing a continuous investment strategy like dollar-cost averaging can help mitigate market risks and volatility specific to the beauty industry.

It is also critical for investors to stay updated on market conditions and performance. Investors need to keep abreast of market trends, the performance of different beauty brands, and the overall business environment to make informed decisions about their investments.

Lastly, grasping the significance of e-commerce in the beauty industry is indispensable. E-commerce has seen significant growth, nearly quadrupling between 2015 and 2022, and now exceeding 20 percent of total beauty brands' sales. It is projected to be the fastest-growing sales channel, with an expected annual growth of 12 percent from 2022 to 2027.

Skin Care and Beauty Brands: Summary

In conclusion, the beauty industry presents a dynamic and promising investment landscape, driven by emerging consumer trends, technological advancements, and a shift towards sustainable cosmetics.

Whether you’re eyeing top-performing stocks or exploring niche markets, strategic moves can help you tap into the industry’s potential.

Sometimes, however, because of its specificity, it can be an underrated business. However, more people know already, that it’s a world not just of glamour and cosmetics, but also of significant growth and brands with a really big potential.

Psst... But if you are still hesitating - we encourage you to take a look at our posts about investments in other industries: entertainment, video games or... dividends!

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