E.L.F. Beauty: Outperforming Market With Outsized Share Gains, Morgan Stanley Raises Expectations

Morgan Stanley analyst Dara Mohsenian reiterated an Overweight rating on the shares of E.L.F. Beauty, Inc. ELF and raised the price target from $118 to $162.

The analyst noted company posted a very large 17% revenue, 20% gross profit, and 71% operating profit beat vs. consensus in 1QFY23.

This was good news, but the analyst wanted to highlight that even more impressively, underlying topline growth accelerating, with a 38% revenue CAGR this quarter vs 2019 far above 30% last quarter, which itself was far above 22% in each of the prior two quarters.

The analyst added that after a sixfold increase in the stock since May of 2022, underlying trends are still accelerating, supporting both substantial near-term upside and longer-term growth potential above what the market is pricing in.

The analyst noted that the Q1 upside/ higher FY guidance confirms the key positive tenets of their recent deep drive report.

Importantly, while ELF is typically very conservative with forward guidance, its $85 million FY revenue raise is far above a ~$30 million beat in Q1, highlighting ELF's confidence in momentum continuing, the analyst commented.

ELF continues to gain outsized market share, including +260 basis points y/y in Q1 and growing +48% vs last year' base, far above +40% Q4 growth, +27% Q3 growth, and +26% Q2 growth, said the analyst.

Price Action: ELF shares are trading higher by 16.4% at $135.63 on the last check Wednesday.