On Thursday, Stifel, a financial services company, adjusted its outlook on e.l.f. Beauty (NYSE: NYSE:ELF), reducing the stock's price target to $131 from the previous $161 while maintaining a Hold rating. The revision comes amid an observed deceleration in sales trends within certain data-tracked channels.
The firm's analyst cited a slight decrease in the forecasts for fiscal years 2025 and 2026 sales and adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) as a reason for the price target adjustment. The new target is based on a 21 times multiple of the projected fiscal year 2026 adjusted EBITDA.
The ongoing Hold rating reflects concerns over the brand's sales momentum, with most growth attributed to distribution gains rather than organic demand. Market share in key categories, such as color cosmetics, has either remained stagnant or declined sequentially. Additionally, the broader U.S. beauty category is experiencing limited growth.
Despite these challenges, Stifel suggests that e.l.f. Beauty's stock may have more potential for gains than losses at its current price level. The analyst sees the stabilization in recent sales trends as a possible sign of bottoming out, especially considering the recent downturn in the company's share price.
The financial services firm also notes that the consensus and e.l.f. Beauty's own guidance for sales and adjusted EBITDA for fiscal year 2025 appear to be reasonable. However, there is a possibility that management may lower its full-year expectations, a move that would align with their historically conservative approach.
The firm believes that any potential to exceed current guidance is limited based on the current trends, although it also thinks that this is likely already factored into the stock's current price.
In other recent news, e.l.f. Beauty has seen significant attention from various analysts. Piper Sandler maintained its Overweight rating on the company's shares, emphasizing the company's potential for growth in digital and international markets. The firm's stance remains positive despite a slowdown in sales growth. On the other hand, Baird reduced its price target for e.l.f. Beauty from $240 to $175 due to slowing U.S. demand, but kept its Outperform rating.
Similarly, Truist Securities lowered its price target to $130, but maintained a Buy recommendation, while DA Davidson reaffirmed a Buy rating, maintaining a price target of $223.00. Morgan Stanley, however, reduced its target from $184 to $139, maintaining an Equalweight rating due to concerns over U.S. scanner data.
Meanwhile, e.l.f. Beauty has reported a 50% increase in net sales and an 80 basis point growth in gross margin. The company also authorized a new $500 million share repurchase program and raised its full-year outlook, projecting net sales growth of 25-27% and adjusted EBITDA growth of 26-28%. These are the recent developments in the company's financial performance.
InvestingPro Insights
Recent InvestingPro data provides additional context to Stifel's analysis of e.l.f. Beauty (NYSE: ELF). The company's revenue growth remains strong, with a 68.32% increase over the last twelve months, aligning with Stifel's observation of distribution gains. However, the stock's recent performance reflects market concerns, with a 39.5% price decline over the past three months.
Despite the recent downturn, e.l.f. Beauty maintains impressive gross profit margins of 70.91%, showcasing its ability to manage costs effectively. This strength is highlighted in an InvestingPro Tip, which notes the company's "impressive gross profit margins."
Another InvestingPro Tip indicates that analysts anticipate sales growth in the current year, potentially supporting Stifel's view that the stock may have more upside than downside at current levels. However, investors should note that ELF is "trading at a high earnings multiple," which could explain the market's sensitivity to any signs of slowing growth.
For readers seeking a more comprehensive analysis, InvestingPro offers 13 additional tips for e.l.f. Beauty, providing a deeper understanding of the company's financial position and market dynamics.
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