e.l.f. Beauty Inc. (NYSE:ELF) is one of the 13 High-Risk High-Reward Growth Stocks to Invest In. On February 9, TD Cowen trimmed its target price on e.l.f. Beauty by 9.1% to $100 (from $110), while retaining its Buy recommendation on the stock. Oliver Chen, the analyst from TD Cowen who made this update, said that this TP change was prompted by an update of his forecast, following the release of Elf Beauty’s Q3-FY2026 results. He added that while Q3 sales grew 38% YoY, he expects revenue growth to taper o ...

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Core Insights - e.l.f. Beauty, Inc. reported a 38% increase in quarterly net sales, reaching $489.5 million, driven by growth in retailer and e-commerce channels both in the US and internationally [1][3] - The company's gross margin declined by approximately 30 basis points to 71%, primarily due to increased tariff costs, although this was somewhat offset by pricing and product mix benefits [2] - e.l.f. Beauty raised its FY 2026 outlook, expecting net sales growth of approximately 22% to 23% year-over-year, up from a previous estimate of 18% to 20%, with Rhode expected to contribute around $260 million to $265 million in net sales for FY 2026, an increase from the prior expectation of $200 million [3] Analyst Ratings - JPMorgan analyst Andrea Teixeira increased the price target for e.l.f. Beauty shares to $105 from $103 while maintaining an "Overweight" rating [4]

TD Cowen analyst Oliver Chen lowered the firm’s price target on Elf Beauty (ELF) to $100 from $110 and keeps a Buy rating on the shares. The firm updated its estimates following Q3 results and see a 2H reset as core growth normalizes to LSD%, which may keep shares range-bound near term. Published first on TheFly – the ultimate source for real-time, market-moving breaking financial news. Try Now>> See the top stocks recommended by analysts >> Read More on ELF: Disclaimer & DisclosureReport an Issue ...

Investment Rating - The report maintains a positive outlook on e.l.f. Beauty, raising the full-year net sales growth guidance from 18%-20% to 22%-23% due to the strong contribution from the Rhode acquisition [2][9]. Core Insights - e.l.f. Beauty achieved a 38% year-over-year increase in net sales for FY26Q3, reaching $489.5 million, with the Rhode acquisition contributing approximately $128 million [2][9]. - The core organic net sales growth was only about 2%, which is below expectations, primarily due to short-term softness in key international markets like the UK and Germany [2][9]. - The company has adjusted its global consumption growth expectation down to 6% from 8%, reflecting a marginal weakening in the broader consumer environment [2][9]. - The adjusted EBITDA rose by 79% to $123 million, representing 25% of net sales, indicating strong operational performance [2][9]. Performance Summary - e.l.f. Beauty has achieved year-over-year net sales growth for 28 consecutive quarters, positioning it among the few publicly-listed companies in the consumer sector capable of sustaining such prolonged high growth [2][9]. - The strong performance is driven by an excellent brand portfolio strategy, particularly the significant contribution from Rhode, alongside organic growth from the core business through a value proposition of premium quality at accessible pricing [2][9]. Cost Structure and Profitability - The gross margin in FY26Q3 decreased by 30 basis points to 71%, mainly due to higher tariff costs, partially offset by pricing and product mix optimization [3][10]. - The ratio of selling, general, and administrative (SG&A) expenses to net sales declined from 54% to 51%, benefiting from improved marketing spend efficiency [3][10]. - Marketing and digital investment as a percentage of net sales decreased from 27% to 21%, but is expected to rebound to around 27% in the second half of the fiscal year due to increased investment in major brand campaigns [3][10]. Brand Performance - The e.l.f. Cosmetics brand saw an 8% year-over-year increase in U.S. consumption, significantly outpacing the overall color cosmetics category growth of 4% [4][11]. - The company has established a dominant 22% market share in the face makeup segment, with significant growth potential remaining in lip and eye categories [4][11]. - Acquired brands like Rhode have achieved record launches in Sephora, and Naturium and e.l.f. SKIN have outperformed the overall U.S. skincare category growth [4][11]. Innovation and Marketing - e.l.f. continues to drive product innovation through community insights, with new products priced competitively against high-end counterparts [5][12]. - Breakthrough marketing campaigns have generated over 4 billion impressions, showcasing the company's effective marketing strategies [5][12]. International Market Potential - International sales currently account for approximately 20% of total sales, indicating substantial growth potential compared to the industry average of over 70% [6][13]. - The company has established a comprehensive distribution network in Germany and is expanding its presence in premium markets like Australia/New Zealand with the Rhode brand [6][13].

Investment Rating - The report maintains a positive outlook on e.l.f. Beauty, indicating an upgrade in full-year net sales growth guidance from 18%-20% to 22%-23% due to the strong contribution from the Rhode acquisition [2][9]. Core Insights - e.l.f. Beauty reported a 38% year-over-year increase in net sales for FY26Q3, reaching $489.5 million, with the Rhode acquisition contributing approximately $128 million [2][9]. - The core organic net sales growth was only about 2%, which is below expectations, primarily due to short-term softness in key international markets like the UK and Germany [2][9]. - The company has adjusted its global consumption growth expectation down to 6% from 8%, reflecting a marginal weakening in the broader consumer environment [2][9]. - Adjusted EBITDA rose 79% to $123 million, representing 25% of net sales, showcasing the company's ability to maintain strong performance over 28 consecutive quarters of year-over-year net sales growth [2][9]. Financial Performance - Gross margin for FY26Q3 decreased by 30 basis points to 71%, mainly due to higher tariff costs, but was partially offset by pricing and product mix optimization [3][10]. - Selling, general, and administrative (SG&A) expenses as a percentage of net sales decreased from 54% to 51%, attributed to improved marketing efficiency and timing shifts of some expenses [3][10]. - The company reported a net income of $39.4 million and an adjusted net income of $74.5 million, with diluted earnings per share at $0.65 and adjusted diluted earnings per share at $1.24 [3][10]. Brand and Market Dynamics - e.l.f. Cosmetics brand achieved an 8% year-over-year increase in U.S. consumption, significantly outpacing the overall color cosmetics category growth of 4% [4][11]. - The company has established a dominant 22% market share in the face makeup segment, with substantial growth potential in lip and eye categories [4][11]. - The Rhode brand has set records for the largest brand launch in Sephora's history in North America and the UK, indicating strong market acceptance [4][11]. Innovation and Marketing Strategy - e.l.f. continues to leverage community insights for product innovation, with new products priced competitively against high-end counterparts, generating positive feedback [5][12]. - Marketing initiatives, including collaborations and campaigns, have resulted in over 4 billion impressions, showcasing the effectiveness of their marketing strategy [5][12]. International Market Potential - International sales currently account for about 20% of total sales, indicating significant growth potential compared to the industry average of over 70% [6][13]. - The company has established a comprehensive distribution network in Germany and is expanding its presence in Australia/New Zealand with the Rhode brand [6][13]. - Despite short-term pressures in the UK market, the company is implementing strategies to strengthen its value proposition and enhance brand awareness [6][13].

Core Viewpoint - E.l.f. Beauty's stock experienced a significant reversal despite strong fiscal Q3 results, presenting a potential buying opportunity for investors [1]. Financial Performance - E.l.f. Beauty reported a 38% year-over-year increase in sales for fiscal Q3, reaching $489.5 million, surpassing the analyst consensus of $460 million [3]. - Adjusted earnings per share (EPS) rose 68% from $0.74 to $1.24, exceeding the analyst consensus of $0.72 [3]. - Adjusted EBITDA increased by 79% to $123 million [3]. Market Position and Growth - The company achieved a gross margin of 65.91% and organic growth, excluding the acquisition of Rhode, was 2% [5]. - Total consumption grew by 6%, with an 8% increase in the U.S. market [5]. - E.l.f.'s namesake brand gained 130 basis points in market share within the mass cosmetics sector during the quarter [5]. Revenue Breakdown - U.S. revenue increased by 36%, while international revenue rose by 44%, although weak consumption was noted in the U.K. [6]. - Rhode contributed $128 million in revenue for the quarter, aided by its launch at Sephora [5]. Future Outlook - E.l.f. raised its full-year fiscal 2026 guidance, now expecting sales growth of 22% to 33%, up from a previous estimate of 18% to 20% [6]. - Updated fiscal 2025 outlook includes net sales of $1.6 billion to $1.612 billion, adjusted EBITDA of $323 million to $326 million, and adjusted EPS of $3.05 to $3.10 [7]. Expansion Plans - The company plans to launch Rhode in Australia and New Zealand and introduce its Naturium brand into Walmart in the U.S. this spring [8]. - E.l.f. will also increase shelf space for its brand at Ulta Beauty and launch at DM in Germany [8]. Investment Consideration - E.l.f. is currently trading at a forward price-to-earnings ratio of 22 and a price/earnings-to-growth (PEG) ratio of 0.4, indicating it may be undervalued [10].

Core Viewpoint - The nostalgia for 2016 among Gen Z is expected to drive a new boom cycle in the beauty industry, particularly benefiting companies like e.l.f. Beauty and Ulta Beauty [1] Group 1: Industry Trends - Gen Z's current social media trend involves sharing photos from 2016, indicating a longing for that era when social media was less commercialized [1] - The year 2016 is identified as a peak time for bold makeup styles, which contrasts with the subsequent trend of "no-makeup makeup" [1] Group 2: Company Impact - Companies such as e.l.f. Beauty and Ulta Beauty are positioned to benefit from this nostalgia-driven trend, potentially leading to increased sales and market interest [1] - The anticipated "supercycle" in beauty products, especially makeup, suggests a significant opportunity for growth for these companies [1]

Core Insights - The market perception of e.l.f. Beauty has shifted from viewing it as a strong growth story to a more cautious stance [1] Company Analysis - e.l.f. Beauty was previously considered a company with a compelling growth narrative, indicating strong potential in the beauty industry [1]

Financial Performance - Net sales increased by $134.2 million, or 38%, to $489.5 million for the three months ended December 31, 2025, compared to $355.3 million for the same period in 2024, driven by the rhode acquisition and growth in both e-commerce and retailer channels [115]. - Gross profit rose by $94.2 million, or 37%, to $347.5 million for the three months ended December 31, 2025, with a gross margin of 71%, slightly down from 71.3% in the previous year due to tariffs [116]. - Net income for the three months ended December 31, 2025, was $39.4 million, representing an increase from $17.3 million in the same period of 2024, with an effective tax rate of 26.9% [120]. - For the nine months ended December 31, 2025, net sales increased by $206.3 million, or 21%, to $1,187.2 million, with the rhode acquisition contributing $180.6 million to this growth [121]. Expenses - Selling, general and administrative (SG&A) expenses increased by $61.7 million, or 28%, to $280.0 million for the three months ended December 31, 2025, primarily due to higher marketing and compensation costs [117]. - SG&A expenses for the nine months ended December 31, 2025, were $706.9 million, an increase of $122.0 million, or 21%, from the previous year, driven by marketing and distribution costs [125]. Acquisition - The rhode acquisition on August 5, 2025, was completed for a purchase price of $897.5 million, funded through a combination of cash, equity, and potential earnout [110]. - Net cash used in investing activities for the nine months ended December 31, 2025, was $603.0 million, primarily related to the rhode Acquisition and capital expenditures [137]. Cash and Liquidity - As of December 31, 2025, the company had $196.8 million in cash and cash equivalents, along with a borrowing capacity of $243.3 million under its Amended Revolving Credit Facility [129]. - The unused balance of the Amended Revolving Credit Facility as of December 31, 2025, was $243.3 million [132][149]. - The company anticipates funding ongoing cash needs from existing cash, cash generated from operations, and if necessary, draws on the Amended Revolving Credit Facility [130]. - The company expects to meet its planned operating, investing, and financing needs for the next twelve months through operating cash flow and available financing [132]. Interest and Debt - Interest expense, net increased to $12.4 million for the three months ended December 31, 2025, compared to $3.5 million in the same period of 2024, largely due to increased debt from the Fifth Amendment to the Amended Credit Agreement [119]. - The interest rate for the Term Facility as of December 31, 2025, was approximately 5.9%, while the interest rate for the Revolving Credit Facility was approximately 5.8% [149]. Operational Strategy - The company raised prices globally for all products sold as of August 1, 2025, to mitigate risks associated with ongoing tariff exposure [108]. - The company has made significant investments in infrastructure, digital capabilities, and expansion to new retailer locations [130]. - The Fourth Amendment to the Amended Credit Agreement established a revolving credit facility of $500.0 million, available for working capital and acquisitions [144]. Working Capital - As of December 31, 2025, working capital, excluding cash and cash equivalents, was $250.5 million, an increase from $214.8 million as of March 31, 2025 [131]. - For the nine months ended December 31, 2025, net cash provided by operating activities was $110.1 million, compared to a net cash used of $2.3 million for the same period in 2024 [134][136]. - Net cash provided by financing activities for the nine months ended December 31, 2025, was $540.9 million, mainly driven by proceeds from the Fifth Amendment establishing the Term Facility [138].