Here's How to Play e.l.f. Beauty Stock After a 54% Drop in 3 Months

Company Overview - e.l.f. Beauty, Inc. (ELF) has experienced a significant stock price decline of 54.2% over the past three months, underperforming the industry decline of 21.7% and the broader Zacks Consumer Staples sector growth of 2.4% [1] - The stock closed at $25.90, nearing its 52-week low of$21.10, and is trading below its 50 and 200-day moving averages, indicating potential weakness [2][8] Valuation Concerns - Despite the stock price decline, e.l.f. Beauty is trading at a forward 12-month P/E ratio of 17.71, which is higher than competitors like Nu Skin Enterprises, Inc. (7.26) and Coty Inc. (11.89), raising questions about its valuation [4] - The company's Value Score of F adds to concerns regarding its future performance [4] Market Challenges - The beauty and cosmetics industry is facing challenges due to evolving consumer preferences, rising inflation, and cautious spending, which are impacting many brands, including e.l.f. Beauty [9] - e.l.f. Beauty has lowered its fourth-quarter fiscal 2025 sales guidance to a modest -1% to +2%, indicating a potential slowdown in growth [10] Competitive Landscape - Established beauty giants like The Estee Lauder Companies continue to dominate the market, while indie brands are attracting consumers with niche offerings and innovative marketing strategies [10] - e.l.f. Beauty's adjusted SG&A expenses increased to 61% of net sales in the fiscal third quarter, up from 59% the previous year, reflecting higher spending on marketing and operations [11] Earnings Outlook - The Zacks Consensus Estimate for e.l.f. Beauty's earnings per share has been revised downward over the past 30 days, indicating a growing bearish outlook among analysts [12] - Recent estimates show a decline in expected earnings for the current and upcoming fiscal years, with current estimates at 0.74 for Q1 2025 and 3.33 for the current year [13] Growth Initiatives - e.l.f. Beauty is focusing on growth initiatives, including strengthening its brand through innovation and strategic expansion, with its skincare segment now representing 18% of total retail sales [14] - The company is expanding retail partnerships and maintaining high productivity per square foot among major cosmetics brands, positioning itself for long-term success [14]