E.l.f. Beauty
shares dropped 10% on Tuesday, after an analyst noted a potential slowdown in the cosmetics company’s sales.
E.l.f. (ticker: ELF) sells makeup and skin care products at lower prices than most competitors, and has increased in popularity in recent years. The company’s shares have soared more than 800% from Dec. 31, 2019, through Tuesday’s close.
Jefferies analyst Ashley Helgans wrote in a research note Tuesday that, according to research firm Nielsen, e.l.f. has had some sales deceleration. The trailing four-week sales for e.l.f. were up 45% from the prior year in the week of Oct. 21, compared with previous trailing four-week sales that were up 49%.
Helgans said in an interview with Barron’s that expectations are so high given the stock’s performance that any data has the potential to spook investors going into earnings. She added that e.l.f. remains one of her top picks.
“One of the reasons we do really like the e.l.f. story from here is, with the macro backdrop getting a little softer, we think by far they’re the best beauty company positioned for any kind of trade down or any kind of recession,” Helgans said.
UBS analyst Peter Grom wrote in a research note Monday he is expecting e.l.f. to post a strong beat and raise when it reports earnings on Wednesday. That wouldn’t be unusual for the company, which has beaten mean earnings expectations 14 out of the last 15 times, going back to February 2020. He rates the stock a Buy with a $138 price target.
Raymond James analyst Olivia Tong upgraded e.l.f. shares to Strong Buy from Buy with a $140 price target on Oct. 23.
“ELF can sustain momentum well ahead of peers in our view due to its robust pace of innovation, much of it in new categories and therefore minimizing cannibalization, differentiated marketing that has been more effective than peers, and accessible price points, a particularly attractive trait if consumer’s financial health deteriorates,” Tong said.
E.l.f. didn’t provide an immediate reponse to a request for comment.
Write to Angela Palumbo at angela.palumbo@dowjones.com
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