When consumers brace for a weakening economy, they spend less on beauty products. In 2024, e.l.f. Beauty (ELF) shares traded as high as $221.83. This double top formed between March and July. Last Friday, ELF stock fell by 9.65%, closing at $122.60.
ELF stock is still too expensive at a non-GAAP price-to-earnings ratio of nearly 40 times. Selling pressure will ease eventually. Investors are willing to pay a premium for elf’s affordable quality products.
A new position for Berkshire Hathaway (BRK-B), Ulta Beauty (ULTA) did not meet the market’s expectations. The value investment firm likely bought ULTA stock because it has no debt. However, the company projected slowing growth. Ulta expects comparable sales for the year to fall by up to 2%. It previously expected sales to increase by 2% to 3%.
CEO Dave Kimbell said that in Q2, business performance did not meet its expectations. In response to factors adversely hurting store performance, Ulta took action to address the trends.
Estee Lauder (EL) is another high-risk stock after peaking in April. Although the firm believes that beauty is a very desirable category, the competitive environment worsened. Firms have lower barriers to entry, giving customers more choice. This hurts EL stock since it pressures the company’s profitability.
