ELF Beauty stock plunged as much as 28% on Friday after the company reported mixed earnings results.
Guidance was below analyst estimates, which the company attributed to lower social media chatter.
The LA wildfires and the brief TikTok ban were reasons for weaker social media trends.
The move: ELF Beauty stock plunged as much as 28.2% on Friday to $66.10. The sell-off extends its decline to about 71% from record highs. The shares had embarked on a massive rally since 2022, soaring from about $25 each to their peak of about $220 a share last June.
The chart:
Why: The cosmetics brand reported mixed earnings results for its fiscal third quarter, which included a lower outlook for its full fiscal year. The company now expects revenue of $1.30 billion to $1.31 billion, below analyst estimates of $1.34 billion, and earnings per share between $3.27 and $3.32, below analyst estimates of $3.54.
What it means: ELF Beauty CEO Tarang Amin said the company’s lower-than-expected guidance was driven by a «weak month» in January, which he attributed to less social chatter about beauty due to the LA wildfires and the brief TikTok ban.
«The LA wildfires, people I think didn’t want to be tone deaf with posting a lot of things while that devastation went on. The second is, there was a lot of uncertainty around TikTok. I feel like the only things people were posting on TikTok was whether it was going to stay open or shut down,» Amin told CNBC. «Whatever the reason may be, that social commentary was way down.»
What the pros are saying: Analysts at Goldman Sachs said that despite the short-term disruption in ELF Beauty’s business, they think long-term trends remain intact.
«We continue to see ELF as one of the fastest growing and most disruptive players in beauty. The company’s continued share gains and growth momentum stand in sharp contrast against softening beauty category trends particularly in mass color cosmetics in the US, where ELF remains the most productive brand at top retailers like TGT, WMT and ULTA,» Goldman Sachs said.
The bank maintained its «Buy» rating on the stock, but lowered its price target to $142 from $165.
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