Morgan Stanley analyst Dara Mohsenian downgraded the rating on e.l.f. Beauty (ELF – Research Report) to a Hold today, setting a price target of $70.00.
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Dara Mohsenian has given his Hold rating due to a combination of factors surrounding e.l.f. Beauty’s recent performance and market conditions. The significant downgrade in their implied Q4 guidance, following the Q3 results, indicates weakness in the company’s performance, particularly as confirmed by January’s U.S. scanner data. Despite a previous upgrade based on expectations of stabilizing trends, the reality has been a notable deceleration, exacerbated by both category and share-specific weaknesses.
Furthermore, the company’s recent slowdown, particularly in January, despite easier comparisons and a finite seasonal period, presents a riskier profile due to the narrow focus of growth predominantly in the lip category. The valuation appears reasonable after a significant stock pullback, providing some justification for the Hold rating. However, given the current lack of visibility and the potential for improvement, Mohsenian opts to remain cautious and moves to the sidelines with this rating.
In another report released today, UBS also downgraded the stock to a Hold with a $74.00 price target.