Buying opportunity in e.l.f. Beauty as price increases will offset tariffs (ELF)

Elf Beauty bucked the market trend and closed with a big gain. Gain of about 6% Monday after Raymond James analyst Olivia Tong recommended buying the stock on the recent dip because she believes the gin is “well positioned to perform materially better.” “Once again when the value trend cools.”

Tong rates the stock a Strong Buy and sees the current weakness as a buying opportunity. Over the past 30 days, elf Beauty (New York Stock Exchange: DwarfGeneral Electric Motor Co. shares fell 12%, more than twice the decline seen in the S&P 500, as the company’s shares were heavily impacted by Chinese manufacturing and the subsequent cost headwinds of higher tariffs on imports into the United States.

“In the event of higher tariffs, we expect ELF to offset the costs through a combination of price increases and cost savings, as it has done in the past,” Tong writes, adding that ELF’s average selling price per unit is 30% lower than the average in the category, leaving room for price increases if necessary without materially impacting demand.

Tong gives the stock a strong buy rating and a $235 price target, representing a 34% upside from Monday’s closing price.

Elf Beauty (ELF) reported first-quarter results after the close on August 7, and is expected to report earnings of $0.66 per share on sales of $330.06 million. That compares to earnings of $0.93 per share on sales of $216.3 million in the same quarter last year.