On Monday, Stifel, a financial services company, adjusted its outlook on e.l.f. Beauty (NYSE:ELF) shares, reducing the price target to $151 from $167 while maintaining a Hold rating on the stock.
This revision comes amidst concerns over the company's market share dynamics, despite positive expectations for sales growth in the upcoming fiscal quarters.
The firm forecasts e.l.f. Beauty's year-over-year sales growth to be 62% for the fourth fiscal quarter of 2024, surpassing the consensus estimate of 56%.
For fiscal year 2025, Stifel projects a 37% increase in sales year-over-year, which also exceeds the consensus of 28%. These projections are seen as reasonable based on a detailed analysis of the company's sales by segment.
However, Stifel anticipates that the initial guidance for fiscal year 2025 will likely align with the consensus estimate, indicating a potential decrease in the rate of upside compared to the previous two fiscal years.
The firm's analysis points to a decline in e.l.f. Beauty's U.S. market share across three of its four major product categories over a 12-week period starting from late February.
This trend coincides with a broader slowdown in U.S. mass beauty sales, which has been particularly noticeable in the second quarter of 2024.
The revised price target of $151 represents a multiple of 24 times the estimated adjusted EBITDA for fiscal year 2026.
Stifel's adjustment reflects concerns about market share and category dynamics that could impact the stock's performance. Nonetheless, the firm still expects e.l.f. Beauty to experience solid growth in its international and untracked U.S. channels.
InvestingPro Insights
In light of Stifel's recent revision of e.l.f. Beauty's price target, current real-time data and insights from InvestingPro offer additional context for investors. e.l.f. Beauty is currently trading at a P/E ratio of 66.15, reflecting a high earnings multiple, which is in line with the company's impressive gross profit margin of 70.33% over the last twelve months as of Q1 2023. This margin showcases the company's efficiency in managing production costs relative to sales, an important metric for investors considering the company's profitability.
Moreover, e.l.f. Beauty has shown a substantial revenue growth of 79.24% in the same period, significantly outpacing the industry average. The company's stock has also experienced a high return, with a 76.43% price total return over the past year. These figures underscore the robust financial health and growth trajectory of e.l.f. Beauty, which may reassure investors despite the concerns raised by Stifel.
InvestingPro Tips suggest that net income and sales are expected to grow this year, which aligns with Stifel's projections of strong sales growth. Additionally, e.l.f. Beauty's stock price movements have been quite volatile, which could present opportunities for investors with a higher risk tolerance. For those looking for more insights, InvestingPro provides 19 additional tips on e.l.f. Beauty, accessible at https://www.investing.com/pro/ELF. To enhance your investing strategy, use coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
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