Shares of e.l.f. Beauty (NYSE: ELF) jumped 11% in Monday trading following a notable upgrade from Morgan Stanley, which raised its rating on the cosmetics company from Equalweight to Overweight.
The investment bank also boosted its price target significantly to $134 from $114, reflecting renewed investor optimism despite ongoing challenges.
The upgrade came as e.l.f. Beauty’s stock continues to recover from a sharp decline that saw shares fall roughly 50% from last year’s all-time high of $172.49.
Currently valued at around $6 billion, the company has maintained solid fundamentals, including a gross profit margin of 71% and 19% revenue growth over the past twelve months, helping underpin Morgan Stanley’s positive outlook.
Morgan Stanley sees attractive entry point amid volatility
Morgan Stanley’s upgrade follows several quarters of volatility for e.l.f. Beauty, which experienced an unexpected slowdown in US sales, contributing to investor caution.
The firm described the current market environment as an “attractive entry point” for investors willing to look past near-term uncertainties.
At the time of writing, the stock was trading $113.57, up 11%.
The bank’s analysis highlights factors weighing on the stock, including vague fiscal second-quarter guidance, temporary pressures in the US low-end consumer segment, uncertain impacts of price increases, and limited clarity around the company’s Rhode acquisition.
This backdrop has led Morgan Stanley to characterize e.l.f. Beauty’s outlook as “a very complicated and uncertain story,” mirroring the experience of other high-growth small- and mid-cap companies that have missed market expectations.
Company performance and forward outlook
e.l.f. Beauty’s recent fiscal results demonstrate ongoing growth momentum despite the challenging environment.
The 9% sales increase and EPS beat in the first quarter provide evidence of underlying strength, though the company refrained from issuing guidance amid volatile tariff conditions.
The company’s management has focused on navigating the shifting consumer landscape, with particular attention to integrating the Rhode acquisition and expanding international reach.
However, investor sentiment remains mixed due to macroeconomic headwinds and uncertainties related to consumer demand and pricing strategies
Mixed analyst views reflect caution and optimism
Monday’s Morgan Stanley upgrade comes amid a broader spectrum of analyst opinions on e.l.f. Beauty’s near-term prospects.
Following the company’s fiscal first-quarter 2026 earnings release, which showed a 9% year-over-year sales increase to $354 million and an EPS beat at $0.89 versus estimates of $0.84, some analysts expressed cautious optimism.
Deutsche Bank upgraded e.l.f. Beauty from Hold to Buy, citing the stock’s recent pullback as an opportunity for upside potential.
Similarly, Bank of America Securities reiterated its Buy rating with a $135 price target, emphasizing the company’s growth strategy through the Rhode acquisition and international expansion plans.
Conversely, Canaccord Genuity lowered its price target to $128 due to tariff-related concerns but maintained a Buy rating.
As e.l.f. Beauty’s shares climb following Monday’s Morgan Stanley upgrade, the stock’s path forward appears poised between cautious optimism and the need to prove sustained growth amid evolving market dynamics.
Analysts and investors alike will be watching closely for clearer signals on the impact of strategic initiatives and broader economic trends shaping the beauty sector.
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