Friday, Goldman Sachs (NYSE:GS) initiated coverage on e.l.f. Beauty (NYSE:ELF), assigning a Buy rating to the stock with a price target of $165.00. This move reflects the firm's view that e.l.f. Beauty stands out as a rapidly growing and innovative force in the beauty industry. According to InvestingPro data, the company has demonstrated impressive revenue growth of 59% in the last twelve months, with analyst targets ranging from $115 to $200.
The Goldman Sachs analyst highlighted e.l.f. Beauty's significant market share gains and growth momentum, especially noteworthy given the general softening trends within the beauty sector at mass retailers. The analyst expects the company to sustain robust top-line growth, propelled by a strategic focus on innovation and marketing approaches that particularly engage the Gen Z demographic. The company maintains industry-leading gross margins of 71% and has earned a "GREAT" financial health score from InvestingPro's comprehensive analysis.
The report also points to e.l.f. Beauty's potential for international expansion, which is currently undervalued according to the analyst's assessment. A single point of market share gain in the company's seven key markets could significantly boost top-line growth.
Additionally, the firm anticipates a steady increase in e.l.f. Beauty's EBITDA margin, projecting a compound annual growth rate (CAGR) of over 20% from the fiscal year 2024 to 2028, which is expected to support consistent growth in earnings per share (EPS) in the low to mid-20 percent range. For deeper insights into e.l.f. Beauty's growth potential and comprehensive financial analysis, investors can access the detailed Pro Research Report available on InvestingPro, which covers over 1,400 top US stocks.
The analyst's positive outlook is further supported by the belief that e.l.f. Beauty's current market valuation is appealing considering its solid fundamentals. The expectation is that these strong fundamentals will lead to a further re-rating above the current levels. However, with the stock trading above InvestingPro's Fair Value estimate and at an EV/EBITDA multiple of 46x, investors should carefully consider the valuation metrics.
In other recent news, e.l.f. Beauty has been the subject of numerous analyst notes. Deutsche Bank (ETR:DBKGn) initiated coverage on e.l.f. Beauty with a Hold rating, acknowledging the company's growth potential and strong cash flow prospects. The bank also highlighted a $500 million share repurchase program and impressive revenue growth of 59% over the last twelve months.
DA Davidson maintained its Buy rating on e.l.f. Beauty, highlighting robust U.S. tracked channel point-of-sale growth, averaging 18.8% year-over-year in the third fiscal quarter of 2025. The firm also projected that international sales could surge by more than 50% year-over-year.
Simultaneously, Piper Sandler reaffirmed its Overweight rating on e.l.f. Beauty, maintaining a price target of $165. The firm's confidence in the company's management capabilities and recent sales data support this outlook. Furthermore, JPMorgan (NYSE:JPM) maintained its Overweight rating and a $154.00 price target on e.l.f. Beauty shares, signaling confidence in the company's financials.
These developments follow allegations from short seller Muddy Waters (NYSE:WAT), who suggested that e.l.f. Beauty had been inflating its revenues, profits, and inventory levels. e.l.f. Beauty refuted these claims, explaining that public import data post-February 6, 2024, does not reflect the majority of their actual U.S. imports. This statement was supported by JPMorgan's analysis, which reaffirmed the credibility of e.l.f. Beauty's financial reporting.
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