What Happened?
Shares of cosmetics company e.l.f. Beauty (NYSE: ELF) jumped 2.5% in the afternoon session after it experienced a technical rebound in the absence of fresh positive news and followed a recent analyst downgrade. The move counters sentiment from the previous day when Deutsche Bank lowered its rating on the stock from "Buy" to "Hold." The bank cited that the company's valuation left less room for upside after a sharp run-up in the stock, with shares up about 25% since early August. The analyst also noted that social media commentary around the makeup company has turned "increasingly critical in recent weeks." Despite the downgrade, Deutsche Bank did raise its price target on the shares to $128 from $121, indicating a belief in the long-term growth outlook, particularly with overseas expansion. However, with no new fundamental drivers, today's price action suggests investors may be looking past the recent ratings change.
After the initial pop the shares cooled down to $128.30, up 2.2% from previous close.
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What Is The Market Telling Us
e.l.f. Beauty’s shares are extremely volatile and have had 48 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 1 day ago when the stock dropped 1.6% on the news that Deutsche Bank downgraded the stock to 'Hold' from 'Buy'. The brokerage cited that social media commentary around the makeup company has turned "increasingly critical in recent weeks." Despite the lowered rating, the bank raised its price target on the shares to $128 from a previous $121. However, investors appeared to focus more on the downgrade. The negative sentiment reflects concerns that shifting consumer opinions online could present a headwind for the company's growth.
e.l.f. Beauty is up 4.3% since the beginning of the year, and at $128.30 per share, it is trading close to its 52-week high of $140.63 from December 2024. Investors who bought $1,000 worth of e.l.f. Beauty’s shares 5 years ago would now be looking at an investment worth $6,623.
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