E.l.f. Beauty, a cosmetics company known for its affordable makeup and skincare products, experienced a 10% drop in shares on Tuesday. This decline came after Jefferies analyst Ashley Helgans highlighted a potential slowdown in the company’s sales.
Sales Deceleration Worries Analysts
According to research firm Nielsen, e.l.f. Beauty has witnessed a deceleration in sales. In the week of October 21, the trailing four-week sales were up by 45% compared to the prior year. However, this growth rate falls slightly short of the previous trailing four-week sales increase of 49%.
Investor Concerns Amid High Expectations
Given the remarkable performance of e.l.f. Beauty’s stock, high expectations have been set for the company’s upcoming earnings announcement. Helgans explains that investors may be easily spooked by any data presented at this time. Despite this, she continues to view e.l.f. Beauty as a top pick.
Positioned Well for Economic Downturn
Helgans further adds that e.l.f. Beauty stands out as the best beauty company positioned for potential economic challenges or a trade-down scenario. With a softer macro backdrop, their affordable products are likely to be attractive to consumers, even during a recession.
Analyst Expectations Remain Positive
UBS analyst Peter Grom anticipates that e.l.f. Beauty will report strong earnings and raise its outlook in the upcoming announcement. This is in line with the company’s consistent history of beating earnings expectations. Grom rates the stock as a Buy with a $138 price target.
Additionally, Raymond James analyst Olivia Tong recently upgraded e.l.f. Beauty shares to Strong Buy from Buy, setting a price target of $140. Tong believes that the company’s strong momentum, constant innovation, effective marketing strategies, and affordable price points will contribute to its sustained success, especially if consumer financial health deteriorates.
E.l.f. Beauty has not yet provided a response to requests for comment.