e.l.f. Beauty Reports Major Earnings Beat and Acquisition Impact
Written by Emily J. Thompson, Senior Investment Analyst
Updated: Aug 27 2024
0mins
Should l Buy ELF?
e.l.f. Beauty's stock fell 7.31% and hit a 20-day low amid a slight decline in the broader market, with the Nasdaq-100 down 0.12% and the S&P 500 down 0.07%.
Despite the stock's decline, e.l.f. Beauty reported a significant earnings beat for Q3, with earnings per share reaching $1.24, far exceeding analyst expectations of $0.72. The company also announced the acquisition of Hailey Bieber's skincare brand, rhode, for approximately $1 billion, which contributed $128 million to net sales growth in Q3. Additionally, e.l.f. raised its full-year revenue outlook, projecting rhode to contribute up to $265 million in net sales this year, reflecting strong confidence in future growth.
The strong earnings report and acquisition details highlight e.l.f. Beauty's robust market position and growth potential, even as the stock experiences short-term volatility. Investors may view this as a buying opportunity given the company's optimistic outlook.
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Analyst Views on ELF
Wall Street analysts forecast ELF stock price to rise
15 Analyst Rating
12 Buy
3 Hold
0 Sell
Strong Buy
Current: 88.040
Low
85.00
Averages
112.21
High
136.00
Current: 88.040
Low
85.00
Averages
112.21
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.
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- Amazon's Market Leadership: Amazon (AMZN), with a market cap of $2.2 trillion, is leveraging its largest logistics network and AI technology to drive robust operating income growth, with a forward P/E ratio expected to be below 26 times by 2026, highlighting its significant growth potential in both e-commerce and cloud computing.
- e.l.f. Beauty's Growth Potential: e.l.f. Beauty (ELF) is trading at a forward P/E of 26 and a PEG ratio below 0.45, indicating undervaluation, while gaining market share in the U.S. cosmetics sector, with further growth anticipated through partnerships with Ulta Beauty and expansion into Germany.
- Acquisition Opportunity with Rhode Brand: The recently acquired Rhode brand by e.l.f. has achieved $200 million in sales within three years, and with e.l.f.'s backing, it is expected to significantly enhance brand value through increased distribution and marketing efforts, making it a strong investment choice.
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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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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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- 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.
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Three Attractive Consumer Stocks to Consider
- MercadoLibre Investment Opportunity: Investing $2,000 in MercadoLibre (MELI) presents a compelling case as its current P/E ratio of 33 is projected to drop to 23.5 by 2027, with the company achieving over 30% revenue growth each quarter for nearly seven years, indicating strong operational leverage and competitive positioning.
- Amazon's Market Leadership: Amazon (AMZN), with a market cap of $2.2 trillion, is leveraging its largest logistics network and AI technology to drive robust operating income growth, with a forward P/E ratio expected to be below 26 times by 2026, highlighting its significant growth potential in both e-commerce and cloud computing.
- e.l.f. Beauty's Growth Potential: e.l.f. Beauty (ELF) is trading at a forward P/E of 26 and a PEG ratio below 0.45, indicating undervaluation, while gaining market share in the U.S. cosmetics sector, with further growth anticipated through partnerships with Ulta Beauty and expansion into Germany.
- Acquisition Opportunity with Rhode Brand: The recently acquired Rhode brand by e.l.f. has achieved $200 million in sales within three years, and with e.l.f.'s backing, it is expected to significantly enhance brand value through increased distribution and marketing efforts, making it a strong investment choice.
See More
Retail Earnings Will Highlight the Importance of Execution Like Never Before
- Earnings Reports: Walmart and Wayfair are scheduled to report their earnings on Thursday.
- Retail Challenges: The current retail environment highlights the importance of brand power and operational efficiency as key strategies to navigate volatility.
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
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
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
