e.l.f. Stock: Is Its Rhode Buy a Genius Move or a Risky Gamble?

Core Insights - e.l.f Beauty is acquiring Rhode for up to $1 billion, which could be transformational for the company [1][2] - The acquisition comes at a time when e.l.f's sales growth has slowed to 4% in Q4 of fiscal 2025 after a 40% increase in the first nine months [3] - Rhode, launched by Hailey Bieber in 2022, has quickly grown its sales to $212 million with minimal advertising [6] Financial Performance - e.l.f's sales growth has been impacted by tariffs, with import taxes from China reaching over 145% at one point, now reduced to 30% [5] - The company plans to raise prices by $1 on all products starting in August to offset tariff costs [5] - e.l.f currently trades at a forward P/E ratio of 32 and a PEG ratio under 0.6, indicating it may be undervalued [13] Market Position and Strategy - Rhode's products will be available in Sephora stores in the U.S., Canada, and the U.K., which is expected to enhance growth [7] - Rhode appeals to a more affluent customer base and complements e.l.f's strength in cosmetics with its focus on skincare [8] - e.l.f has opportunities to expand Rhode's product assortment and retail distribution significantly [11] Growth Potential - The core e.l.f business has solid growth potential, especially in international markets and adjacent categories like fragrance and hair care [12] - The acquisition of Rhode is seen as a significant opportunity for e.l.f to enhance its market presence and growth trajectory [14]