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On Friday, UBS analysts downgraded e.l.f. Beauty stock, traded on the New York Stock Exchange under the ticker (NYSE:ELF), from Buy to Neutral and significantly reduced the price target to $74.00 from the previous $158.00. The stock, currently trading at $88.49, has fallen sharply from its 52-week high of $221.83. According to InvestingPro data, the broader analyst community maintains price targets ranging from $105 to $180, suggesting potential upside despite the recent decline. The adjustment follows a nearly 30% decline in the company’s share value over the last month, attributed to a slowdown in U.S. market trends.
The company’s third-quarter results and updated outlook suggest that this growth deceleration could persist, potentially leading to single-digit percentage growth rates for the first time in four years. While InvestingPro data shows impressive historical revenue growth of 59% and strong gross margins of 71%, UBS highlighted that the revised projections may not be adequately reflected in the current stock valuation, given the uncertainties surrounding e.l.f. Beauty’s future growth trajectory. The stock currently trades at a P/E ratio of 44.87, indicating a premium valuation relative to peers.
Previously, UBS’s bullish stance on e.l.f. Beauty was partly based on the expectation of strong earnings per share (EPS) growth driven by operational leverage, even as sales growth normalized. However, the analysts now see limited potential for significant EPS improvement in the context of slowing sales, adjusting their forecast to an 11% EPS increase in fiscal year 2026, down from an earlier prediction of 20%.
UBS indicated that a reassessment of their position could occur if they obtain clearer indications that the current sales slowdown is a short-term issue. Nevertheless, the analysts have chosen a more cautious approach for the time being, advising a neutral stance until there is more clarity on the company’s growth outlook.
In other recent news, e.l.f. Beauty has been the subject of various analyst notes and financial updates. Piper Sandler cut its price target for e.l.f. Beauty to $131, while maintaining an Overweight rating, suggesting that the recent share price decline was excessive. Simultaneously, TD Cowen reduced its price target to $130, maintaining a Buy rating, but indicated a challenging outlook for the cosmetics industry.
DA Davidson also maintained a Buy rating on e.l.f. Beauty with a price target of $170. The firm expressed caution regarding the company’s upcoming financial guidance and noted a slight decline in the company’s U.S. tracked channel point-of-sale data. Canaccord Genuity adjusted their financial outlook for e.l.f. Beauty, reducing the price target to $174 from the previous $200, citing a deceleration in sales momentum.
These are among the recent developments for e.l.f. Beauty. The company experienced a decrease in sales ahead of its earnings report, with Nielsen reporting a 2% decline in the company’s sales year-over-year. However, despite these challenges, e.l.f. Beauty continues to outperform the broader industry, with growth in the tracked channel reported at 13.7% year-over-year for the 13 weeks ending December 29.
Investors and stakeholders now await the company’s earnings report later this week to gauge its performance and future outlook. Analysts’ expectations and projections will play a crucial role in shaping investors’ perceptions of the company’s financial health.
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