ELF - Assessing The Pros And Cons: The Case For Holding e.l.f. Beauty Stock Amidst Growth Concerns

2024-06-25 05:27:30 ET

Summary

• Many of its products are manufactured by third-party suppliers in China, which has several risks.
• The beauty industry is a highly competitive industry with low barriers to entry.
• The stock has near-term growth and valuation concerns.
• e.l.f. Beauty is one of the best growth stories in the consumer products industry.

e.l.f. Beauty ( ELF ) has become one of the market's strongest growth stories in the consumer space over the last two years. From the beginning of 2022 to the June 21, 2024 market close, the stock has risen 520% due to rapid revenue growth and its ability to take market share from competitors. Chief Executive Officer ("CEO") Tarang Amin said on the company's fourth quarter fiscal year ("FY") 2024 earnings call , " We are one of only five public consumer companies out of 274 that has grown for 21 straight quarters and average at least 20% sales growth per quarter ."

The company has become extremely popular among teenagers. The 47th semi-annual Piper Sandler Taking Stock With Teens Survey released in April 2024 stated, " e.l.f. Beauty continues to dominate the [beauty] space, ranking number one among teens in addition to ranking in the top 10 skincare brands and beauty destinations ." It was the fifth straight year that it ranked number one.

The company is well known for selling prestige quality cosmetics at prices where its customers see value. Seeking Alpha posted an article on June 18 that quoted Canaccord Genuity Sr. Wellness and Beauty analyst Susan Anderson: " Overall, we still believe ELF is in the early innings of its growth story as the brand still lags the legacy brands around brand recognition and even shelf space depending on the channel ." Canaccord Genuity also raised ELF's price target from $214 to $250. ...

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