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Tuesday, DA Davidson reaffirmed a Buy rating on e.l.f. Beauty (NYSE:ELF) with a steady price target of $170.00, significantly above the current trading price of $120.24. According to InvestingPro data, the stock is trading at premium multiples with a P/E ratio of 62x, reflecting high growth expectations.
The firm observed that e.l.f. Beauty's year-over-year point-of-sale (POS) growth in U.S. tracked channels has generally been between 10% to 20%. However, the growth rate for the last two weeks ending January 11, 2025, showed a slower increase at 3% year-over-year.
The analyst from DA Davidson anticipates that e.l.f. Beauty's growth may experience an uptick as the company enters a period with comparatively easier prior-year POS comparisons through the end of March 2025. With impressive last twelve months revenue growth of 59% and strong gross profit margins of 71%, the company has demonstrated robust operational execution. This could potentially lead to better-than-expected results for the company's December 2024 quarter, referred to as F3Q25, with the earnings report scheduled for January 29, 2025.
Looking further ahead, the analyst pointed out that for e.l.f. Beauty to exceed its full-year 2025 guidance, a significant acceleration in tracked channel POS growth would be necessary. This is in light of the current consensus estimate for F4Q25E sales, which projects a 19% year-over-year increase.
The $170 price target set by DA Davidson is anchored in a valuation multiple of 26 times the firm's projected CY26E EBITDA of $375 million. This target remains unchanged despite the recent slowdown in POS growth, indicating the firm's sustained confidence in e.l.f. Beauty's performance potential.
e.l.f. Beauty's stock performance and future outlook will likely continue to be influenced by its ability to maintain or increase its POS growth rate, especially as it approaches the release of its F3Q25 financial results. The market will be watching closely to see if the company can meet or surpass the sales expectations set for the remainder of the fiscal year.
In other recent news, e.l.f. Beauty has been the subject of mixed market developments. Despite a reported sales decline of 2% YoY in the latest week, the company has witnessed a 9% growth over the latest rolling four weeks, according to Nielson data. Sales over a rolling 12-week period have risen by 16%, suggesting a more nuanced view of the company's performance.
In the realm of analyst ratings, Morgan Stanley (NYSE:MS) upgraded e.l.f. Beauty stock from Equal-weight to Overweight, citing a more attractive valuation. Meanwhile, Truist Securities maintained its Buy rating on the stock, projecting continued double-digit growth for the company. Piper Sandler reaffirmed an Overweight rating on e.l.f. Beauty shares, seeing limited downside risk.
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