E.l.f. Beauty is navigating a challenging yet opportunistic landscape in 2025. After experiencing a significant dip early in the year, the company saw its stock recover with the announcement of its acquisition of the skin care brand Rhode. However, following the release of its fiscal second-quarter results, which indicated that gross margins were affected by rising tariff costs and management offered cautious guidance, the stock faced renewed scrutiny.
Despite the market fluctuations, e.l.f. Beauty remains resilient, bolstered by a robust underlying business. The acquisition of Rhode, which was founded by model Hailey Bieber, is a significant move for the company, yet its core business continues to thrive. E.l.f. has reported a 12% organic consumption growth in the U.S., even though it forecasted a more conservative organic growth of 2% to 5%. This figure reflects actual sales at the retail level, highlighting a disconnect that management hopes will be resolved over time.
The firm has seen some softness in the U.K. market and is adjusting to the performance of its successful launch in Germany. Additionally, recent price increases on its products are expected to enhance revenue growth while recouping some lost margins.
E.l.f. Beauty has a notable presence in the U.S. mass color cosmetics market, maintaining its market share for 27 consecutive quarters and currently holding around a 13% share. The company aims to increase its footprint even more, especially at retailers like Target, where it already has more than 20% shelf space, and plans further expansion at Ulta Beauty and Walmart.
On the international front, e.l.f. sees potential in markets such as the U.K. and Canada, with careful expansions noted in Poland and Dubai. These efforts underscore the company’s strategic approach to global growth and product distribution.
The Rhode acquisition presents a promising avenue for e.l.f. Beauty. With Rhode’s rapid ascendance, garnering over $200 million in sales within just three years, the brand’s integration under e.l.f.’s management framework opens up avenues for innovation and market expansion. Known for leveraging influencer marketing and a smart distribution strategy, e.l.f. can apply these tactics to elevate Rhode, potentially expanding its product line to include cosmetics as well.
Currently, e.l.f.’s stock appears appealingly priced, trading at a forward price-to-earnings ratio of around 22, coupled with a price/earnings-to-growth ratio below 0.4—indicators of undervaluation. Despite the market challenges, e.l.f. Beauty remains positively positioned as it continues to explore growth prospects, making it a compelling consideration for investors looking for recovery potential in 2026 and beyond.
