A New Focus on National Retailers and Digital Platforms Could Boost This $8 Stock
E.L.F. Beauty Inc.’s (NYSE: ELF) decision to close all 22 of its stores is getting support from the analyst community. The company plans to focus on national retailers and digital platforms after its store closures.
e.l.f. Beauty, Inc., a beauty company, provides cosmetic and skin care products under the e.l.f. brand name worldwide. The company offers eye, lip, face, and skin care products, as well as kits and tools. It sells its products through national and international retailers and direct-to-consumer channels, which include e-commerce and e.l.f. stores in the United States; and internationally primarily through distributors.
SunTrust’s Robinson Humphrey, said: “We believe the exit from the retail business is a prudent move. We never fully understood how this helped a brand that was already widely available for a consumer with limited brand loyalty.”
SunTrust rates E.L.F. shares a buy with a $13 price target.
Stifel analysts added: “While the closures will result in a one-time accounting charge of $23 million-to-$25 million, to be recorded in the transition period, we view this decision positively, as the company clearly wasn’t succeeding in operating its own stores, and can better allocate those resources to marketing, product development and driving sales growth through retailer channels.”
According to Market Watch, “E.L.F. shares are a hold with a $7 price target. E.L.F.’s Chief Executive Tarang Amin agreed, saying on the call that the “stores require resources we believe can be better deployed to other brand building initiatives,” according to a FactSet transcript.
The stores closed effective February 26 with associates paid through March 9 along with severance benefits. Amin said the store expenses exceeded gross margins by more than $1.5 million in 2018.
“Cowen estimates that ELF can recapture at least half of these lost sales given its broad presence in major national retailers, plus 10% penetration on elfcosmetics.com.”
They rate E.L.F. shares as outperform but cut their price target to $8.50 from $14. E.L.F. stock plummeted 22% in Wednesday trading, and are down 63.6% over the last year. The S&P 500 index has gained 1.7% over the past 12 months.”
ELF Beauty’s rival, Revlon, plunged Tuesday on data showing the cosmetic company was struggling to sell products. Revlon is expected to release its fourth-quarter report on March 21 which could provide valuable insight in to the sector for investors considering ELF Beauty.
For now, some analysts remain bullish on ELF, and it could be time to take a closer look at the stock.
ELF should be considered a buy after the recent bullish crossover in the stochastics indicator shown at the bottom of the chart.
Look for an entry at $8.14 with a price target of at least $9.05 based on the pattern in the chart.