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e.l.f. Beauty Tumbles 38% in 2025: How to Play the Stock for 2026?
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Key Takeaways
ELF shares have dropped 37.9% amid slowing organic growth, margin pressure and a tougher outlook.
Core sales turned negative as retailer delays, rising tariffs and high SG&A weighed on performance.
The Rhode acquisition boosts the portfolio but adds debt as ELF faces sustained cost and margin headwinds.
e.l.f. Beauty, Inc. (ELF - Free Report) has seen a sharp reversal this year, with shares sliding 37.9% in the year-to-date period. The pullback reflects growing investor discomfort with slowing organic growth, margin pressures and a more challenging near-term outlook.
After years of solid gains, e.l.f. Beauty has underperformed the industry’s growth of 10.3%, the Zacks Consumer Staples sector’s decline of 0.9% and the S&P 500’s gain of 19.5%. ELF’s stock has also lagged major peers like The Estee Lauder Companies Inc. (EL - Free Report) , Nu Skin Enterprises, Inc. (NUS - Free Report) and Interparfums, Inc. (IPAR - Free Report) . Estee Lauder and Nu Skin have surged 40.8% and 52.1% year to date, while Interparfums has dropped 37%.
Image Source: Zacks Investment Research
Why ELF Shares Are Declining
e.l.f. Beauty’s core business has started to soften. In the second quarter of fiscal 2026, organic sales turned negative due to shipment disruptions associated with retailers who delayed adopting the company’s August price increase. International growth also moderated sharply, pressured by tough comparisons and slower momentum in key European markets.
The bigger concern comes from tariff-driven cost pressure. Roughly 75% of ELF’s production still comes from China, leaving it heavily exposed to sharply higher tariff rates. These tariffs have escalated well above internal expectations, leading to a significant contraction in gross margin. Even with price adjustments, the company has been unable to fully offset the cost burden, and management expects tariff headwinds to persist well into fiscal 2026.
Operating expenses are also running high. Marketing spending is set to rise in the back half of the year, with campaigns shifting later than usual. At the same time, SG&A remains elevated due to investments in team expansion, ERP transition and international infrastructure. Together, these costs have weighed on operating leverage and contributed to a year-over-year decline in adjusted EBITDA.
Adding to the pressure, the Rhode acquisition has significantly amplified ELF’s debt load, increasing financial risk at a time when margins are already depressed, and cash flow conversion is expected to be softer.
How Are e.l.f. Beauty’s Estimates Trending?
Analysts have lowered their expectations materially. The Zacks Consensus Estimate for fiscal 2026 and 2027 EPS has fallen sharply over the past 60 days. The downward revisions likely stem from the combination of slowing organic growth, higher tariff-driven costs and continued SG&A pressure, all of which may weigh on profitability over the near term.
Image Source: Zacks Investment Research
e.l.f. Beauty’s Valuation Picture
Though e.l.f. Beauty’s valuation has come down, the stock is not yet inexpensive, given its slowing fundamentals. Its forward 12-month P/E of 22.32X is below the industry average of 29.23X, yet ongoing margin pressure and higher SG&A limit how attractive this discount really is. The company also carries a Value Score of F, signaling weak value traits versus peers. While EL trades much higher at 42.4X, IPAR and NUS are trading at relatively moderate levels of 17.23X and 7.41X, respectively.
Image Source: Zacks Investment Research
ELF’s Fundamental Strengths Still in Place
Despite these pressures, the company continues to display meaningful strengths. The company’s brand momentum remains strong, supported by market-leading consumption growth and continued share gains. The Rhode acquisition has emerged as an important growth contributor. The brand’s strong debut at Sephora and rapid expansion across e-commerce channels have enhanced the company’s multi-brand portfolio and helped offset slower growth in the core business.
What to Do With ELF Stock?
e.l.f. Beauty remains a well-positioned brand with strong consumer appeal, but the near-term setup looks challenging. Margin pressure from tariffs, softer organic growth and higher operating costs are likely to keep earnings subdued for a while. At the same time, the stock’s valuation still reflects a degree of optimism that may take time to rebuild. Given these evolving fundamentals, investors may prefer to take a more cautious stance heading into 2026 and consider reducing exposure until there is better visibility on margin stabilization and revival in the core business.
e.l.f. Beauty currently carries a Zacks Rank #5 (Strong Sell).
Image: Shutterstock
e.l.f. Beauty Tumbles 38% in 2025: How to Play the Stock for 2026?
Key Takeaways
e.l.f. Beauty, Inc. (ELF - Free Report) has seen a sharp reversal this year, with shares sliding 37.9% in the year-to-date period. The pullback reflects growing investor discomfort with slowing organic growth, margin pressures and a more challenging near-term outlook.
After years of solid gains, e.l.f. Beauty has underperformed the industry’s growth of 10.3%, the Zacks Consumer Staples sector’s decline of 0.9% and the S&P 500’s gain of 19.5%. ELF’s stock has also lagged major peers like The Estee Lauder Companies Inc. (EL - Free Report) , Nu Skin Enterprises, Inc. (NUS - Free Report) and Interparfums, Inc. (IPAR - Free Report) . Estee Lauder and Nu Skin have surged 40.8% and 52.1% year to date, while Interparfums has dropped 37%.
Image Source: Zacks Investment Research
Why ELF Shares Are Declining
e.l.f. Beauty’s core business has started to soften. In the second quarter of fiscal 2026, organic sales turned negative due to shipment disruptions associated with retailers who delayed adopting the company’s August price increase. International growth also moderated sharply, pressured by tough comparisons and slower momentum in key European markets.
The bigger concern comes from tariff-driven cost pressure. Roughly 75% of ELF’s production still comes from China, leaving it heavily exposed to sharply higher tariff rates. These tariffs have escalated well above internal expectations, leading to a significant contraction in gross margin. Even with price adjustments, the company has been unable to fully offset the cost burden, and management expects tariff headwinds to persist well into fiscal 2026.
Operating expenses are also running high. Marketing spending is set to rise in the back half of the year, with campaigns shifting later than usual. At the same time, SG&A remains elevated due to investments in team expansion, ERP transition and international infrastructure. Together, these costs have weighed on operating leverage and contributed to a year-over-year decline in adjusted EBITDA.
Adding to the pressure, the Rhode acquisition has significantly amplified ELF’s debt load, increasing financial risk at a time when margins are already depressed, and cash flow conversion is expected to be softer.
How Are e.l.f. Beauty’s Estimates Trending?
Analysts have lowered their expectations materially. The Zacks Consensus Estimate for fiscal 2026 and 2027 EPS has fallen sharply over the past 60 days. The downward revisions likely stem from the combination of slowing organic growth, higher tariff-driven costs and continued SG&A pressure, all of which may weigh on profitability over the near term.
Image Source: Zacks Investment Research
e.l.f. Beauty’s Valuation Picture
Though e.l.f. Beauty’s valuation has come down, the stock is not yet inexpensive, given its slowing fundamentals. Its forward 12-month P/E of 22.32X is below the industry average of 29.23X, yet ongoing margin pressure and higher SG&A limit how attractive this discount really is. The company also carries a Value Score of F, signaling weak value traits versus peers. While EL trades much higher at 42.4X, IPAR and NUS are trading at relatively moderate levels of 17.23X and 7.41X, respectively.
Image Source: Zacks Investment Research
ELF’s Fundamental Strengths Still in Place
Despite these pressures, the company continues to display meaningful strengths. The company’s brand momentum remains strong, supported by market-leading consumption growth and continued share gains. The Rhode acquisition has emerged as an important growth contributor. The brand’s strong debut at Sephora and rapid expansion across e-commerce channels have enhanced the company’s multi-brand portfolio and helped offset slower growth in the core business.
What to Do With ELF Stock?
e.l.f. Beauty remains a well-positioned brand with strong consumer appeal, but the near-term setup looks challenging. Margin pressure from tariffs, softer organic growth and higher operating costs are likely to keep earnings subdued for a while. At the same time, the stock’s valuation still reflects a degree of optimism that may take time to rebuild. Given these evolving fundamentals, investors may prefer to take a more cautious stance heading into 2026 and consider reducing exposure until there is better visibility on margin stabilization and revival in the core business.
e.l.f. Beauty currently carries a Zacks Rank #5 (Strong Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.