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On Monday, Morgan Stanley downgraded e.l.f. Beauty’s (NYSE:ELF) rating from Overweight to Equal-weight, citing concerns that the current valuation already includes anticipated strong growth in various aspects of the business. Analyst Dara Mohsenian noted that the stock’s remarkable surge over the past few years now implies a slightly negative outlook, which is unusual for a growth stock. The valuation, he added, now reflects an extraordinary level of growth.
Looking ahead, Mohsenian expressed caution about e.l.f. Beauty’s future growth prospects, warning of potential challenges in sales growth comparisons and the possibility of stock price volatility. He indicated that the market’s current expectations could pose a significant challenge for e.l.f. Beauty to reach and maintain a high market share in the U.S. cosmetics industry by fiscal year 2027.
Morgan Stanley’s revised price target for e.l.f. Beauty is now $137, down from the previous $168. The stock has traded between $52.87 and $164.71 in the last 52 weeks. As of 11:15 a.m. on Monday, the stock was down 4.85%, with trading volume higher than normal. e.l.f. Beauty (NYSE:ELF) is scheduled to report its earnings on February 6. The company has seen consistently upward revisions in its earnings per share (EPS) over the past 14 reports.