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On Tuesday, TD Cowen maintained a Buy rating on e.l.f. Beauty (NYSE: NYSE:ELF) shares but reduced the price target from $150.00 to $130.00. Currently trading at $105.04, the stock has declined nearly 12% in the past week. According to InvestingPro data, the stock’s RSI suggests oversold territory, while analyst targets range from $115 to $200, indicating potential upside despite recent market pressure. The adjustment follows an analysis of recent sales data and market trends which suggest a challenging outlook for the cosmetics industry.
Oliver Chen of TD Cowen highlighted that despite e.l.f. Beauty’s strong performance during the holiday season, where sales outpaced the category and competitors, early indications in January showed a downturn. The brand experienced a 2% decline in sales, while the broader cosmetics and nail category saw a 10% drop. This softening in sales is attributed in part to weather and fire disruptions, which have exerted more pressure on the mass cosmetics sector compared to the prestige segment. InvestingPro data shows the company maintains impressive gross profit margins of 71% and operates with moderate debt levels, suggesting resilience during market challenges.
The analyst anticipates third-quarter sales growth for e.l.f. Beauty to be above the market expectation of 22%, predicting a 23% increase. This forecast is based on Nielsen data, which includes Amazon (NASDAQ:AMZN) sales, showing robust performance in the three months leading up to December 2024. Additionally, sales from untracked channels are expected to contribute at least an additional 5 percentage points to overall sales figures.
Despite the positive holiday season performance, where e.l.f. Beauty gained significant market share (approximately 160 basis points), the outlook remains cautious. Chen suggests that management is likely to set sales growth guidance for the fourth quarter of 2025 in line with market expectations of 19%, a figure that TD Cowen also models.
Looking ahead, the analyst believes that e.l.f. Beauty’s sales could pick up again as new products are introduced and the company faces easier comparative periods. With a strong five-year revenue CAGR of 31% and analysts forecasting continued profitability, the company’s fundamentals remain solid despite market pressures. However, the sentiment for the near-term growth prospects of the mass cosmetics category, including e.l.f. Beauty, leans towards caution due to the current market volatility. For deeper insights into e.l.f. Beauty’s valuation and growth prospects, including 16 additional ProTips and comprehensive financial analysis, visit InvestingPro.
In other recent news, e.l.f. Beauty has been the focus of several analyst notes and market developments. DA Davidson maintained a Buy rating on e.l.f. Beauty with a steady price target of $170, reflecting high growth expectations. The firm noted the company’s year-over-year point-of-sale growth in U.S. tracked channels generally ranged between 10% to 20%, with a recent slowdown to 3%.
Morgan Stanley (NYSE:MS) upgraded e.l.f. Beauty stock from Equal-weight to Overweight, citing a more attractive valuation. This came as the firm sees a compelling long-term growth profile for e.l.f. Beauty, supported by the company’s impressive 59% revenue growth over the last twelve months and robust 71% gross profit margins.
Truist Securities reasserted its Buy rating on e.l.f. Beauty shares with a maintained price target of $150. The firm pointed to the company’s potential for continued growth, driven by a robust new product pipeline and increased shelf space.
Recent Nielson data indicated a sales decline of 2% year-over-year in the latest reported week for e.l.f. Beauty. However, the company has seen a 9% growth over the latest rolling four weeks and a 16% increase over the past 12-week period.
These are recent developments that reflect the ongoing momentum and growth opportunities for e.l.f. Beauty. However, it is important to note that these are analyst projections and actual results may vary.
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