Cosmetics company e.l.f. Beauty Inc ELF has managed to mesmerize an analyst at KeyBanc Capital Markets on all counts but its valuation.
ELF, which targets millennials, is a disruptor focusing on innovation and quality, with the cost competitiveness of its products being an added advantage, Gere said in a Wednesday note. (See the analyst's track record here.)
The company is competing in the attractive beauty market and is likely to grow faster than the industry, Gere said.
"ELF's ability to disrupt the industry with highly innovative products at a lower price through multiple channels gives it an advantage over legacy brands," Gere said.
The features that add to the stock's investment appeal are, according to Gere:
- Appeal across social media, creating brand awareness.
- A multichannel approach.
- Innovative products offered at affordable prices.
- Margin expansion opportunity through volume growth.
- Strong management and ownership.
- M&A premium afforded for the company.
But KeyBanc sees the competitive environment within the cosmetics space; the possibility of a 20-percent shortfall relative to the revenue guidance on ELF's potential inability to capture incremental square footage; and limited flexibility to achieve scale and rich valuation as risks.
The premium valuation of the shares keeps KeyBanc on the sidelines, given its belief that the stock has limited upside based on the current multiple and an anticipated sales growth deceleration ahead.
The Price Action
ELF shares are down about 20 percent year-to-date.
© 2022 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
Ad Disclosure: The rate information is obtained by Bankrate from the listed institutions. Bankrate cannot guaranty the accuracy or availability of any rates shown above. Institutions may have different rates on their own websites than those posted on Bankrate.com. The listings that appear on this page are from companies from which this website receives compensation, which may impact how, where, and in what order products appear. This table does not include all companies or all available products.
All rates are subject to change without notice and may vary depending on location. These quotes are from banks, thrifts, and credit unions, some of whom have paid for a link to their own Web site where you can find additional information. Those with a paid link are our Advertisers. Those without a paid link are listings we obtain to improve the consumer shopping experience and are not Advertisers. To receive the Bankrate.com rate from an Advertiser, please identify yourself as a Bankrate customer. Bank and thrift deposits are insured by the Federal Deposit Insurance Corp. Credit union deposits are insured by the National Credit Union Administration.
Consumer Satisfaction: Bankrate attempts to verify the accuracy and availability of its Advertisers' terms through its quality assurance process and requires Advertisers to agree to our Terms and Conditions and to adhere to our Quality Control Program. If you believe that you have received an inaccurate quote or are otherwise not satisfied with the services provided to you by the institution you choose, please click here.
Rate collection and criteria: Click here for more information on rate collection and criteria.