E.l.f. Beauty Faces Challenges in China: Tariffs and Elevated Valuations Endanger ETF Investments
Written by Emily J. Thompson, Senior Investment Analyst
Updated: Nov 06 2025
0mins
Source: Benzinga
E.l.f. Beauty Stock Decline: E.l.f. Beauty Inc's stock plummeted 29% on Wednesday and an additional 36% on Thursday, negatively impacting several consumer and retail ETFs that are exposed to similar high-multiple, tariff-sensitive companies.
Impact of Tariffs on Earnings: The company's net income dropped 84% due to new tariffs, leading to a decline in gross margins and prompting a price increase across its products, raising concerns about the broader vulnerability of consumer brands relying on global supply chains.
Valuation Concerns: Despite the significant selloff, E.l.f. still trades at around 70 times forward earnings, a valuation more suited for tech startups than a cosmetics company facing margin pressures, prompting analysts to cut price targets and ratings.
ETF Manager Caution: The situation serves as a reminder for ETF managers that high-growth stories can quickly become liabilities, urging investors to reassess their exposure to consumer goods and retail sectors, particularly those with premium valuations.
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Analyst Views on ELF
Wall Street analysts forecast ELF stock price to rise
13 Analyst Rating
10 Buy
3 Hold
0 Sell
Strong Buy
Current: 74.330
Low
85.00
Averages
117.50
High
136.00
Current: 74.330
Low
85.00
Averages
117.50
High
136.00
About ELF
e.l.f. Beauty, Inc. is a multi-brand beauty company. The Company offers inclusive, accessible, clean, vegan, and cruelty-free cosmetics and skincare products. The Company's family of brands includes e.l.f. Cosmetics, e.l.f. SKIN, Naturium, Well People, Keys Soulcare, and rhode. Its e.l.f. SKIN is an ingredient-focused, dermatologist-developed formulas for every eye, lip and face. The Company operates across beauty categories including eye, lip, and face makeup, beauty tools and accessories, and skincare products. Its color cosmetics and skin care products are broadly sold through food, drug, and mass channels, as well as through department stores and direct and specialty channels. The Company sells its products with retailers in the United States, as well as internationally. It also sells its products online through its own direct e-commerce channels, as well as through other e-commerce Websites.
About the author
Emily J. Thompson
Emily J. Thompson, a Chartered Financial Analyst (CFA) with 12 years in investment research, graduated with honors from the Wharton School. Specializing in industrial and technology stocks, she provides in-depth analysis for Intellectia’s earnings and market brief reports.
e.l.f. Beauty Maintains Low-Cost Leadership Despite Price Increase
- Sales Growth Outlook: e.l.f. Beauty anticipates a net sales increase of at least 22% year-over-year for fiscal 2026, having completed three quarters with a 21% sales rise, indicating strong market demand driven by the appeal of its low-priced products, which boosts investor confidence.
- Price Strategy Adjustment: On August 1, e.l.f. Beauty raised its product prices by approximately 15%, yet its offerings remain about 20% cheaper than competing mass-market brands, allowing the company to enhance sales and margins while maintaining its market leadership position.
- Profitability Challenges: While e.l.f. Beauty remains profitable, its gross margin has been pressured by tariffs, particularly as its products are manufactured in heavily impacted China, and the $1 billion acquisition of beauty brand rhode has also affected its financial statements in the short term.
- Valuation Analysis: e.l.f. Beauty's stock has significantly declined from its highs, currently trading at a P/E ratio of 42, which, although considered expensive, is below its average valuation since early 2022, suggesting that if profits return to normalized levels, the valuation could further decrease.
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Investment Analysis of e.l.f. Beauty Stock
- Sales Growth Outlook: e.l.f. Beauty anticipates a net sales increase of at least 22% year-over-year for fiscal 2026, having already completed three quarters with a 21% sales growth, indicating strong market demand driven by the appeal of its low-priced products, which enhances investor confidence.
- Price Strategy Adjustment: Despite raising product prices by approximately 15% on August 1, e.l.f. Beauty's products remain about 20% cheaper than competing mass-market brands, allowing the company to boost sales and margins while solidifying its position as a low-cost leader in the market.
- Profitability and Acquisition Impact: Although e.l.f. Beauty's profits have declined due to tariff impacts, the company continues to grow at double-digit rates while making acquisitions, demonstrating resilience amid macroeconomic volatility and still achieving profitability according to Generally Accepted Accounting Principles (GAAP).
- Valuation and Market Performance: e.l.f. Beauty's stock price has dropped significantly from its highs, currently trading at a price-to-earnings (P/E) ratio of 42, which, while considered expensive, is below its average valuation since early 2022; if profits return to normalized levels, the valuation should further decrease, attracting long-term investor interest.
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- Market Share Growth: e.l.f. is growing at twice the rate of its competitors in the U.S. cosmetics market, with increasing shelf space at major retailers like Walmart, reflecting an enhancement in brand influence.
- On Holding Footwear Brand: On Holding's stock is down 29%, but its sales surged 35% year-over-year in the latest quarter, showcasing the brand's strong growth potential despite demand uncertainties.
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- Wendy's Stock Decline: Wendy's shares fell 7.7% on Thursday, down 55% from their 52-week high, highlighting the persistent pressures facing the fast-food industry, which may impact its future market performance.
- Retail Sector Dynamics: The Amplify Online Retail ETF dropped nearly 4% on Thursday, now down 19.5% from its September high, reflecting weakness in the retail market, especially after experiencing five consecutive weeks of declines, which could negatively affect overall consumer confidence.
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- Increased Ownership: Following this acquisition, Prime Capital's stake in CAVA reached 7.19%, significantly impacting its reportable U.S. equity assets under management, indicating optimism about CAVA's growth potential.
- Market Performance: As of February 11, 2026, CAVA shares were priced at $67.37 with a market cap of $7.81 billion; despite market challenges, revenue grew 23% in the first nine months of fiscal 2025, showcasing strong expansion momentum.
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e.l.f. Beauty Maintains Low-Cost Leadership Despite Price Increase
- Sales Growth Outlook: e.l.f. Beauty anticipates a net sales increase of at least 22% year-over-year for fiscal 2026, having completed three quarters with a 21% sales rise, indicating strong market demand driven by the appeal of its low-priced products, which boosts investor confidence.
- Price Strategy Adjustment: On August 1, e.l.f. Beauty raised its product prices by approximately 15%, yet its offerings remain about 20% cheaper than competing mass-market brands, allowing the company to enhance sales and margins while maintaining its market leadership position.
- Profitability Challenges: While e.l.f. Beauty remains profitable, its gross margin has been pressured by tariffs, particularly as its products are manufactured in heavily impacted China, and the $1 billion acquisition of beauty brand rhode has also affected its financial statements in the short term.
- Valuation Analysis: e.l.f. Beauty's stock has significantly declined from its highs, currently trading at a P/E ratio of 42, which, although considered expensive, is below its average valuation since early 2022, suggesting that if profits return to normalized levels, the valuation could further decrease.
See More
Investment Analysis of e.l.f. Beauty Stock
- Sales Growth Outlook: e.l.f. Beauty anticipates a net sales increase of at least 22% year-over-year for fiscal 2026, having already completed three quarters with a 21% sales growth, indicating strong market demand driven by the appeal of its low-priced products, which enhances investor confidence.
- Price Strategy Adjustment: Despite raising product prices by approximately 15% on August 1, e.l.f. Beauty's products remain about 20% cheaper than competing mass-market brands, allowing the company to boost sales and margins while solidifying its position as a low-cost leader in the market.
- Profitability and Acquisition Impact: Although e.l.f. Beauty's profits have declined due to tariff impacts, the company continues to grow at double-digit rates while making acquisitions, demonstrating resilience amid macroeconomic volatility and still achieving profitability according to Generally Accepted Accounting Principles (GAAP).
- Valuation and Market Performance: e.l.f. Beauty's stock price has dropped significantly from its highs, currently trading at a price-to-earnings (P/E) ratio of 42, which, while considered expensive, is below its average valuation since early 2022; if profits return to normalized levels, the valuation should further decrease, attracting long-term investor interest.
See More
Emerging Brands Present Buying Opportunities Amid Stock Pullbacks
- e.l.f. Beauty Brand: e.l.f. Beauty's stock has fallen 67%, yet its annual sales have surged from $578 million to $1.52 billion, indicating strong market demand and suggesting a potential rebound as sales growth continues.
- Market Share Growth: e.l.f. is growing at twice the rate of its competitors in the U.S. cosmetics market, with increasing shelf space at major retailers like Walmart, reflecting an enhancement in brand influence.
- On Holding Footwear Brand: On Holding's stock is down 29%, but its sales surged 35% year-over-year in the latest quarter, showcasing the brand's strong growth potential despite demand uncertainties.
- Pricing Power Demonstrated: On Holding's ability to maintain premium pricing without discounts indicates product quality and consumer loyalty, suggesting it will continue to attract consumers willing to pay a premium for comfort.
See More
Market Update: S&P 500 Declines and Upcoming CPI Data
- CPI Expectations: The consumer price index, set to be released at 8:30 a.m. ET on Friday, is expected to show a month-over-month increase of 0.3% and a year-over-year rise of 2.5%, which could significantly influence market sentiment and lead investors to reassess their risk appetite.
- Moderna Stock Fluctuations: Moderna's shares have surged 50% over the past three months, closing at $40.11 on Thursday, although this remains significantly lower than the pandemic peak of $497, indicating ongoing volatility in biotech stocks that investors are closely monitoring.
- Wendy's Stock Decline: Wendy's shares fell 7.7% on Thursday, down 55% from their 52-week high, highlighting the persistent pressures facing the fast-food industry, which may impact its future market performance.
- Retail Sector Dynamics: The Amplify Online Retail ETF dropped nearly 4% on Thursday, now down 19.5% from its September high, reflecting weakness in the retail market, especially after experiencing five consecutive weeks of declines, which could negatively affect overall consumer confidence.
See More
Prime Capital Increases Stake in CAVA Group Amid Price Decline
- Share Acquisition: Prime Capital Management increased its stake in CAVA Group by 490,300 shares in Q4 2025, investing $27.34 million, reflecting confidence in the company despite a 48.5% drop in stock price over the past year.
- Increased Ownership: Following this acquisition, Prime Capital's stake in CAVA reached 7.19%, significantly impacting its reportable U.S. equity assets under management, indicating optimism about CAVA's growth potential.
- Market Performance: As of February 11, 2026, CAVA shares were priced at $67.37 with a market cap of $7.81 billion; despite market challenges, revenue grew 23% in the first nine months of fiscal 2025, showcasing strong expansion momentum.
- Strategic Implications: CAVA aims to operate over 1,000 restaurants by 2032, and Prime Capital's investment could yield substantial returns in the future, especially as CAVA is viewed as a potential opportunity similar to Chipotle at its current valuation.
See More
Retail Sales Figures Expected to Validate a Strong Holiday Season
Retail Sales Report: The upcoming retail sales report is expected to confirm a successful 2025 holiday season.
Unexpected Success: The holiday season managed to exceed expectations despite potential challenges.
See More
