Prediction: The e.l.f. Sell-Off Is a Golden Opportunity

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].