Investing.com -- Estee Lauder (NYSE:EL) received two downgrades from Wall Street analysts following its latest quarterly earnings report, citing prolonged sales declines and concerns about strategy and execution under its new leadership.

Wells Fargo downgraded the stock to Equal Weight, cutting its price target from $105 to $72.

The firm expressed skepticism about Estee Lauder's approach, highlighting that while management points to Asia and China market weaknesses as key issues, analysts believe operational inefficiencies are at the core of the problem.

The company faces "industry-worst operational deleverage," Wells Fargo noted, referencing its analysis showing a significant drop in revenue and gross profits since 2019, along with sharply declining earnings per share (EPS).

"We see little point spending when a key headwind is the China category," the bank added, emphasizing concerns over whether management has a clear plan to address structural issues.

Adding to the challenges, Estee Lauder recently withdrew its fiscal 2025 guidance and announced a 47% dividend cut, moves that Wells Fargo interprets as an attempt to give incoming CEO Stephane de la Faverie more flexibility.

However, analysts questioned whether the new leadership has the ability or inclination to tackle the operational issues.

JPMorgan similarly downgraded Estee Lauder to Neutral from Overweight, lowering the price target to $72 from $113 per share, citing "prolonged sales declines and limited visibility on recovery."

The bank adjusted its estimates to reflect weaker-than-expected demand, especially in Asia and China, where the anticipated impact of government stimulus on luxury beauty spending may be slower than hoped.

While JPMorgan views de la Faverie's leadership as a potential positive, it advises investors to wait for clearer signs of improvement, noting, "we don't expect to receive any visibility for at least another three months."

With continued operational challenges and market uncertainties, analysts appear cautious, advising investors to adopt a wait-and-see approach as Estee Lauder undergoes restructuring efforts.

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