e.l.f. Beauty Inc (NYSE: ELF) reported topline results Tuesday that were 4 percent below expectations and guided to fourth-quarter 2019 revenue that's15 percent lower than the current consensus estimate.
The beauty brand has a lack of earnings visibility and is closing its unprofitable retail stores, according to BMO Capital Markets.
The company is now refocusing on digital and national retailers and increasing its marketing spend in an effort to drive growth, according to the sell-side firm.
BMO Capital Markets’ Shannon Coyne maintained a Market Perform rating on e.l.f. Beauty and slashed the price target from $14 to $7.
The cosmetics brand missed revenue expectations due to weakness at national retailers as well as lower holiday program sales, Coyne said in a Tuesday note.
Management guided to sales of $55-$58 million, which represents a decline of 12-17 percent year-on-year. This translates to EPS of 4-6 cents versus the consensus estimate of 11 cents.
The company also projected an increase in marketing spend to mid-to-high single digits as a percentage of sales versus 4 percent in FY18. Management plans to focus on driving first-to-mass consumer awareness, Coyne said.
The beauty brand has execution risks tied to its product packaging initiative Project Unicorn, and e.l.f. has not provided any guidance for FY20, citing lack of visibility on the initiative, the analyst said.
BMO lowered its FY20 EPS estimate for e.l.f. from 70 cents to 47 cents.
Shares of e.l.f. Beauty were down 21.94 percent at $7.40 at the time of publication Wednesday.
35 Stocks Moving In Wednesday's Pre-Market Session
6 Stocks Moving In Tuesday's After-Hours Session
Latest Ratings for ELF
|Feb 2019||BMO Capital||Maintains||Market Perform||Market Perform|
|Feb 2019||Morgan Stanley||Maintains||Underweight||Underweight|
|Feb 2019||Wells Fargo||Maintains||Underperform||Underperform|
View More Analyst Ratings for ELF
View the Latest Analyst Ratings
See more from Benzinga
- Morgan Stanley: Pressures On Dean Foods Could Weigh On Company Throughout 2019
- Guggenheim Is Warming Up To The PagSeguro Story
- BTIG Downgrades Orthofix Medical On M6 Uncertainty
© 2019 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.