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e.l.f. Beauty: Live Video Play

Jul. 12, 2017 3:40 PM ETe.l.f. Beauty, Inc. (ELF)1 Comment


  • e.l.f. Beauty trades at the post-IPO lows.
  • The company has major growth catalysts at national retailers and rides the live video trend.
  • The stock isn't cheap, but does offer reasonable valuation for the presented opportunity.

After spending part of the weekend at the mall visiting Macy's (M) and Sephora, my view of the beauty sector was altered. The traffic at the much smaller Sephora store was busy while the massive department store was slow and the makeup counters were virtually empty.

e.l.f. website image

The visual points suggest that e.l.f. Beauty (NYSE:ELF) might have plenty of upside. The stock trades near the post-IPO lows at around $25 following disappointing 2017 guidance, providing a possible opportunity to load up on a stock set to benefit from the growth in live video.

At the start of June, Jefferies upgraded the beauty sector and initiated coverage on e.l.f. with a price target of $30. The stock is currently only worth $1.15 billion with the target placing a valuation of nearly $1.5 billion.

As one can see, e.l.f. remains a relatively small company. Ulta Beauty (ULTA) played the growth in the cosmetics and beauty segment to a nearly $20 billion valuation at the highs. The growth that the beauty retailer continues seeing should only benefit the company that claims to make luxurious beauty accessible for all.

Going back to Q1, the market was disappointed when e.l.f. guided to 2017 revenues of only up to $290 million. The consensus estimate was up at $291 million though the guidance is for revenue growth of up to 28%. The company has major catalysts via gaining shelf space at national retailers like Target (TGT) and Wal-Mart (WMT).

The stock only trades at about 4x revenue estimates suggesting e.l.f. isn't an expensive stock with that growth rate. Analysts only forecast earnings of $0.55 next year, but the beauty supplier is still in growth mode and not optimizing for earnings.

The stock remains a good way to play the selfie generation, but goes far beyond just selfies. The increasing importance

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Stone Fox Capital Advisors, LLC is a registered investment advisor founded in 2010. Mark Holder graduated from the University of Tulsa with a double major in accounting & finance. Mark has his Series 65 and is also a CPA.

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