Consumer Staples

Report by Hedgeye

Hedgeye has been short ELF for much of the past year, citing an oversaturated beauty market and soft organic core, with units down c.5% after the Aug 25 price increase, but now believes that last month's haircare launch creates a more constructive setup. They see haircare as a natural extension of ELF's dupe model into a fast-growing, high-priced beauty category, with $6-10 products undercutting prestige brands while “skinification” increases multi-SKU routine potential. The 2022 ELF SKIN launch, now the #11 mass skincare brand, provides a template, while the March haircare test sold out in 48 hours with 65% new-to-brand buyers. As the top line improves due to hair care launch, continued growth in Rhode/Skincare and international whitespace (legacy peers 70% Intl. vs ELF 20%) Hedgeye sees the stock revisiting $100 by year-end and more than doubling over a TAIL duration.

Consumer Staples

Report by Badger Consultants

The stock trades at too high of a multiple given the collapsing revenue growth rate, according to Tom Chanos. Street estimates of 34% revenue growth this quarter and 21% growth next quarter are unrealistic. The consumer has hit the wall. Meanwhile, operating expenses are increasing rapidly. Last quarter, expenses increased 96% vs. 50% for revenue. ELF has also announced a $500m buyback plan, however, its cash flow is ~$60m p.a. and the business only has $109m cash. So, this announcement was purely to keep the stock price up. Finally, Tom flags substantial insider sales over recent months. If ELF gets a market multiple like Ulta, it is a $40 stock (60% downside).

Report by MYST Advisors

While MYST’s generalist events typically offer a diverse set of ideas, they were shocked by the extremely high percentage (>70%) of Consumer-related Shorts (Cheesecake Factory, Dollarama, Ebay, Elf Beauty, Hertz, O'Reilly Automotive, Simply Good Foods, Utz Brands) presented last week! Other themes included companies facing funding issues (AST SpaceMobile, Hawaiian Electric Industries, HTZ) or exhibiting accounting red flags (CAKE, EBAY, UTZ) and stocks priced for perfection (CME Group, DOL CN, Loar Holdings, ORLY).

The ideas presented at MYST’s previous Bear’s Den Forum (Jun 24) dramatically outperformed over 1-month period (~71% hit rate, +7.4% average alpha).

Consumer Staples

Report by Singular Research

A hidden gem for investors - ELF’s strategic agility, quick product development and ability to bring prestige-like products to the mass market at an affordable price, positions the group for continued success in the ever-evolving cosmetics industry. Its commitment to staying in touch with consumer preferences and trends, embracing new platforms like TikTok and exploring opportunities in gaming, AI and data analytics further reinforces their low-risk, high-reward innovation strategy. Singular Research initiates coverage with a Buy rating with potential upside of ~40% and a manageable downside risk of 10%.