Elf Beauty short report ‘holds no water,’ says Canaccord

Canaccord notes that Muddy Waters released a short report indicating they believe Elf Beauty (ELF) is overstating their revenues over the last three quarters and “selling product it does not have” in what the firm says would be “one of the largest modern-day corporate fraud cases” if true. However, the firm believes the short report “holds no water” as the thesis relies on data that had previously omitted import data for Elf and other companies; there is not a strong correlation between third-party import data and Elf’s reported inventory; and tracked channel sales show strong consumption. The firm believes “the principle of Occam’s razor should be applied,” stating that “the simplest explanation is usually the most accurate.” Canaccord maintains a Buy rating and $200 price target on Elf Beauty shares.