Investing.com — Upgraded by Morgan Stanley ELF Beauty Inc (NYSE: ) to “Overweight,” at an attractive valuation after the stock halved from its 2024 high. The brokerage believes the pullback presents a buying opportunity, given the company’s long-term growth potential and improving trends in US scanner data.

ELF continues to gain US market share, albeit in a sluggish beauty category. Strong international expansion and growth in Naturium’s business are additional drivers. Morgan Stanley (NYSE: ) also expects easier year-over-year comparisons and potential upside in near-term earnings and EBITDA.

The stock, which trades at 30x trailing twelve-month earnings, is below its five-year average of 40x, which the company views as a disconnect given the firm’s strong growth outlook.

“Today’s valuation compels our minds with the stock almost 50% off the high and easier​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​frontier comparisons comparisons on the horizon in the last few quarters, ” added the analyst.

The brokerage noted that China’s tariff risk given that 70% of COGS is China sourcing in the US, adding “but we believe this is mitigated by the 10% magnitude of President-elect Trump’s recent comments -o.

MS said the 10% tariff would be manageable and would only require about 2.5% of US prices to recover even before the ELF could be used for other reasons, adding that the ELF would have the ability to eventually price tariffs that has a successful historical 2019/2022 price increase with a low elasticity of demand provided by it. low price point.