Morgan Stanley sees great value in beauty stock after dramatic 50% drop

In a recent report dated January 13, 2025, Morgan Stanley's analyst, Dara Mohsenian, announced a significant upgrade for shares of e.l.f. Beauty following a considerable sell-off in 2024. The cosmetics stock underwent a steep decline, finishing the year down 13%, marking its first losing year since 2018. This downturn saw shares plummet to around half of their recent high of above $218 from June 2024. Mohsenian's decision to upgrade the stock from equal weight to overweight, while also increasing the price target by $14 to $153, indicates a bullish stance on the company due to its long-term growth potential. The upgrade reflects a shift in market sentiment after concerns regarding high valuations, challenging sales comparisons, and tariff risks were addressed. Moreover, the analyst pointed out that the cosmetic stock's valuation became increasingly appealing compared to its industry peers in the consumer staples sector, especially given the lackluster outlook for competitors. Overall, Mohsenian’s optimistic outlook on e.l.f. Beauty stock provides a contrast to previous assessments that led to the downgrade approximately a year ago, signaling a promising opportunity for investors who are looking for recovery in stocks that show potential after being undervalued.