Jefferies Analyst Upgrades e.l.f. Beauty Stock, Citing Growth Catalysts

Jefferies analyst Ashley Helgans has upgraded e.l.f. Beauty stock (ELF) to Buy from Hold and raised her price target to $115 from $110. This upgrade comes as the cosmetics company experiences several growth catalysts, leading to a positive outlook for the future.

Helgans highlighted various reasons for her upgrade, including strong demand, the benefits of merger and acquisition activity, international expansion, and a recent valuation pullback. Despite consumer weakness, the beauty category has remained resilient, as demonstrated by e.l.f.’s fiscal first-quarter financial results in August. The company surpassed Wall Street expectations, posting higher earnings and revenue, and also raised its fiscal-year revenue outlook.

One significant development for e.l.f. Beauty was its acquisition of skincare brand Naturium. Helgans viewed this move as positive, as it allows the company to introduce new products to the market and keep customers engaged in the rapidly evolving makeup industry. The addition of Naturium also diversifies e.l.f.’s portfolio and balances out any rotation between skin and cosmetic cycles.

Helgans sees potential for e.l.f. Beauty to expand further internationally, particularly in Europe. She believes that if e.l.f. achieves its current market share in Western Europe, it could generate an additional $650 million in retail sales. Europe’s color cosmetics industry is comparable to that of the United States, presenting significant opportunities for e.l.f.

The timing of the stock upgrade is strategic, as e.l.f. Beauty’s valuation has recently declined, bringing it down to around 37 times forward earnings. This is a drop from its high of approximately 63 times forward earnings in July.

With these positive developments and growth prospects, e.l.f. Beauty stock has gained investor attention. In premarket trading, shares were up 2.4% to $98.90, reflecting a 75% increase in value year-to-date.

Overall, Jefferies’ upgrade and price target increase indicate a positive outlook for e.l.f. Beauty, driven by various growth catalysts. Investors and beauty enthusiasts alike will be watching closely as the company continues to expand and innovate in the cosmetics industry.