Raymond James Names Top 3 Picks in Beauty Stocks

Raymond James has unveiled its top three selections within the beauty sector, emphasizing firms poised to thrive amidst prevailing market circumstances. The evaluation highlights entities showcasing credible self-help narratives, resilience in challenging times, or advantageous positioning in value categories. This ranking amalgamates premium recovery plays alongside growth-oriented value strategies, as the beauty industry confronts inconsistent category performance.

Estée Lauder emerges as one of Raymond James' leading recommendations in the beauty domain, neatly fitting the credible self-help category. The company regained momentum in fiscal 2026, propelled by fragrance sales and a revival in China. Profit margins are also showing signs of recovery. Despite makeup and hair care segments remaining stagnant or contracting, the valuation already incorporates an element of the anticipated growth acceleration.

Ulta shares the top-pick position with Estée Lauder and stands as the higher-quality entity capable of weathering market storms. Raymond James elevated Ulta's rating to Strong Buy, anticipating accelerated growth following a period of substantial investment. The August quarter underscored this resilience, with Ulta raising its full-year forecast.

CEO Kecia Steelman cited broad-based consumer spending across demographic groups and continued demand from prestige beauty, particularly fragrances. Ulta has also gained market share in prestige while maintaining flat shares in other categories. The divisional performance remains uneven, with fragrance leading the charge, makeup relatively stagnant, and skincare and wellness experiencing slight declines.

Management's second-half guidance suggests a slowdown, positioning the stock as a bet on share appreciation and operational success rather than category tailwinds.

E.l.f. rounds out the top three picks and exemplifies the advantaged value-end portfolio. First-quarter growth was primarily driven by international markets and the Rhode business segment, while organic unit volumes dipped. The core e.l.f. brand faced challenges, with Rhode acting as a mitigating factor. Growth for Rhode now hinges on expanding its distribution network, with plans to launch in Sephora stores across 19 European countries this autumn.

The company anticipates becoming the fastest beauty brand to achieve $1 billion in net sales. Notably, tariff refunds also contributed to the quarter's performance.