Elf Beauty shares extend decline as earnings prompt several rating cuts

February 08, 2025 12:41 AM AEDT | By Investing

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Elf Beauty shares extend decline as earnings prompt several rating cuts

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Investing.com -- e.l.f. Beauty (NYSE:ELF) shares tumbled more than 25% in premarket trading Friday after the cosmetics company lowered its annual sales and profit forecasts, citing sluggish demand in the mass beauty segment at the start of the year.

The disappointing outlook led to several analyst downgrades, adding to the stock’s downward pressure.

The company now expects full-year net sales between $1.30 billion and $1.31 billion, down from its previous forecast of $1.315 billion to $1.335 billion. It also reduced its annual adjusted earnings per share guidance to a range of $3.27 to $3.32, from the prior estimate of $3.47 to $3.53.

e.l.f. reported strong third-quarter results, with net sales rising 31% to $355.32 million, surpassing analyst expectations of $329.67 million, according to LSEG data.

The broader beauty industry is facing headwinds, with Estee Lauder (NYSE:EL) announcing job cuts earlier this week as it struggles with declining demand for beauty products in Asia’s travel retail sector.

UBS analysts downgraded e.l.f shares to Neutral from Buy following the report, and more than halved the price target on the stock to $74 from $158.

ELF shares are down nearly -30% over the last month as a result of a sharp deceleration in US tracked trends,” UBS analysts led by Peter Grom said in a note.

“However, the company's 3Q results/updated outlook implies that this deceleration in growth may continue, with the updated outlook implying that growth could move into the + single-digit% range for the first time in four years,” they added.

Morgan Stanley (NYSE:MS) analysts also slashed the stock’s rating to Equal Weight from Overweight, coupled with a sharp price target cut to $70 from $153.

Driving the downgrade are “lower growth forecasts after a large implied CQ1 revenue guide down, confirming US trends have slowed materially after January US scanner data weakness,” analysts explained.

D.A. Davidson was also among the investment banks that downgraded the stock.

This article first appeared in Investing.com

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