On Monday, Morgan Stanley (NYSE: MS ) raised its rating on Elf Beauty (NYSE: ELF ) stock from Equal-weight to Overweight while increasing its price target from $139 to $153. The upgrade comes as the firm sees a more attractive valuation for Elf Beauty after the stock has fallen nearly 41% in the last six months, according to data from InvestingPro. The stock currently trades at a P/E ratio of 64.7, reflecting its premium growth status.
In the analyst's view, Elf Beauty has a compelling long-term growth profile, which now looks even more attractive following the recent decline in share value. This view is supported by the company's impressive sales growth of 59% over the last twelve months and robust gross profit margins of 71%, as reported by InvestingPro . The analyst emphasizes the potential for near-term revenue and EBITDA growth in the second half of the fiscal year, driven by robust market share gains in the US, strong international growth and expansion opportunities for the Naturium business.
Despite a slowdown in US scanner data in recent quarters, the analyst notes that trends are showing improvement, particularly in Elf Beauty's market share in a still weak beauty category. The expectation of easier comparisons in the near future is seen as a potential catalyst that could lead to performance even exceeding consensus forecasts.
Morgan Stanley also cites the long-term potential for international and Naturium growth as a reason for the upgrade. Elf Beauty's current valuation of 30 times next-twelve-month (NTM) earnings per share (EPS) is below the five-year average of 40, suggesting that the valuation may have become too pessimistic.
The company recommends using the current valuation as an entry point into what it believes is a strong long-term growth story for Elf Beauty.
In other recent news, Elf Beauty has been the focus of several analyst reports. The company has seen impressive sales growth of 59% over the last twelve months and has a strong gross profit margin of 71%. Truist Securities reiterated a Buy rating on Elf Beauty and raised the price target to USD 150, underlining the company's potential for sustained double-digit growth.
Goldman Sachs initiated coverage with a "buy" rating and emphasized the potential for international expansion.
Piper Sandler also reiterated its "Overweight" rating, expressing confidence in the company's ability to exceed full-year guidance.
Deutsche Bank (ETR: DBKGn ) initiated coverage with a Hold rating, recognizing growth potential and strong cash flow prospects, but expressing concerns about competition. These recent developments reflect the continued momentum and growth opportunities for Elf Beauty.
