What Happened?
Shares of cosmetics company e.l.f. Beauty (NYSE:ELF) jumped 21.1% in the morning session after the company reported impressive third-quarter earnings, which blew past analysts' revenue, EBITDA, and EPS expectations. Sales were driven by market share gains in the US and a 91% year-on-year growth in the international market. ELF expanded its footprint, launching in new markets like Germany, and increasing distribution in existing markets like Canada and the UK. Digital sales are also contributing nicely to growth, rising 40% year on year, supported by its Beauty Squad loyalty program, which has 5.3 million members.
As a result of the improved performance during the quarter, the company was able to comfortably raise its revenue and EBITDA guidance for the full year. Overall, we think this was an impressive quarter.
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What The Market Is Telling Us
e.l.f.’s shares are extremely volatile and have had 35 moves greater than 5% over the last year. But moves this big are rare even for e.l.f. and indicate this news significantly impacted the market’s perception of the business.
The biggest move we wrote about over the last year was 10 months ago when the stock dropped 7.8% on the news that Morgan Stanley analyst Dara Mohsenian downgraded the stock's rating from Overweight (Buy) to Equal Weight (Hold). The analyst added, "With the stock nearly tripling since early 2023 and up 10x since the beginning of 2020, the Bull-Bear skew is now slightly negative, which is rare for this growth stock, and we believe valuation reflects outsized growth in the business."
e.l.f. is down 13.5% since the beginning of the year, and at $121.09 per share, it is trading 44.5% below its 52-week high of $218 from June 2024. Investors who bought $1,000 worth of e.l.f.’s shares 5 years ago would now be looking at an investment worth $7,000.
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