e.l.f. Beauty (ELF) shares surged on Monday after Morgan Stanley upgraded the cosmetics maker to Buy from Hold, calling the recent pullback an “attractive entry point” for investors. Notably, Morgan Stanley’s four-star-rated analyst Dara Mohsenian also raised his price target on ELF stock from $114 to $134, suggesting an upside of 20% from current levels. Following the upgrade, ELF stock gained almost 10% on Monday and another 1.3% in pre-market hours on Tuesday.
Elevate Your Investing Strategy:
- Take advantage of TipRanks Premium at 50% off! Unlock powerful investing tools, advanced data, and expert analyst insights to help you invest with confidence.
Here’s Why Morgan Stanley Turned Bullish
Last week, e.l.f. Beauty posted its Q1FY26 results, beating Wall Street’s expectations by a small margin. However, the stock dropped as executives expressed doubts about whether customers would accept the steep price hikes introduced this month to offset tariff costs. Meanwhile, net income slid 30% from last year, with China tariffs weighing heavily on profits. As a result, ELF stock dropped over 10% after Q1 results and is down 50% from last year’s peak.
However, Mohsenian believes Wall Street is overlooking the profit lift from e.l.f. Beauty’s recent price hikes and its acquisition of Rhode, Hailey Bieber’s fast-growing cosmetics brand.
Mohsenian thinks concerns about the company’s recent price hike hurting demand are exaggerated. Notably, e.l.f. Beauty raised prices by an average of 14% on August 1 across all its products, marking the biggest and most widespread increase in its history. Mohsenian added that critics worry that it’s the first time e.l.f. has raised prices across its entire range and fear low-income U.S. shoppers might cut back. Still, Mohsenian thinks those worries are overblown.
He noted that beauty buyers are typically less price-sensitive because these products hold high personal value. He further pointed out that e.l.f.’s cosmetics are already priced lower than many rivals, leaving little room for shoppers to trade down.
Is ELF a Good Stock to Buy Now?
Overall, analysts remain highly optimistic about ELF stock, with a Strong Buy consensus rating based on 16 Buys and two Holds. The average price target for ELF is $130.00, suggesting an upside potential of 16.41% from its current price.
Year-to-date, ELF stock has declined by 11%.
