elf Beauty Shares Plunge Following Grim Earnings Forecast

Investors in elf Beauty witnessed a dramatic sell-off this week as the company’s stock value plummeted by more than 30%. The steep decline was triggered by a deeply disappointing financial outlook for fiscal year 2026, which overshadowed better-than-anticipated quarterly results. Market participants expressed shock at the significantly weakened profit expectations.

Quarterly Performance Overshadowed by Future Concerns

The company’s recent quarterly report presented a mixed picture. elf Beauty reported earnings per share of $0.68, substantially exceeding analyst projections of $0.57. However, revenue figures told a different story, with the company generating $343.94 million against expectations of $367.89 million.

The real market shock emerged from the company’s forward-looking statements. Management’s adjusted EPS guidance for 2026 now stands between $2.80 and $2.85, representing a substantial drop from the previous year’s $3.39. The company specifically highlighted that tariff expenses are pressuring gross margins by 165 basis points.

Trading activity reflected investor panic, with shares tumbling as much as 26% in premarket activity. The selling pressure continued throughout the week, culminating in a total decline exceeding 30%.

Analyst Community Responds with Widespread Downgrades

Financial institutions moved quickly to reassess their positions on elf Beauty following the guidance announcement. A wave of rating adjustments swept through the analyst community as experts recalibrated their expectations.

Should investors sell immediately? Or is it worth buying elf Beauty?

UBS reduced its price target from $150 to $105 while downgrading the stock to “Neutral.” Similarly, Piper Sandler slashed its target from $150 to $100, also adopting a “Neutral” stance. Both firms cited concerns about disappointing core growth prospects reflected in the new guidance.

Other financial houses maintained more optimistic ratings but still adjusted their projections. Both Morgan Stanley and Jefferies kept their “Buy” recommendations but implemented price target reductions. The current consensus among 17 covering analysts sits at “Moderate Buy” with an average price target of $126.80.

Growth Narrative Faces Structural Challenges

Until recently, elf Beauty represented a remarkable growth story in the cosmetics sector, having delivered 27 consecutive quarters of expanding revenues and market share. The acquisition of Hailey Bieber’s Rhode brand showed early promise, with its launch at Sephora North America setting new records and outperforming previous benchmarks by two and a half times.

However, significant structural challenges now threaten this growth trajectory. Approximately 75% of the company’s production originates from China, where tariff implementations are substantially compressing profit margins. Management has indicated planned price increases as a countermeasure, but market observers question whether these adjustments will sufficiently offset the margin pressure and salvage the earnings forecast.

The coming quarterly reports will provide crucial evidence about whether the current stock collapse represents an overreaction or the beginning of a more sustained downward trend for the cosmetics retailer.