ELF Beauty is the IBD Stock of The Day for Wednesday, but not because the stock is a buy. Elf stock is flashing a sell signal as it breaks below a key level of support.
Ulta Comments Spark Cosmetics Drop
Beauty and cosmetics stocks tumbled Wednesday following cautious comments from Ulta Beauty executives during the JPMorgan Annual Retail Round Up Investor Conference.
Ulta CEO Dave Kimball and CFO Paula Oyibo said the company is seeing "a bit slower growth" than anticipated this year and expects comparable sales growth on the "lower end" of its guidance for the first half of the year, The Fly reported.
"We had planned for moderation in total category growth to kind of the mid-single-digit range," Oyibo said. "What we've seen so far is a slowdown in the total category across price points and segments. So that's a bit earlier and a bit bigger than we thought."
Ulta previously guided 2024 comparable sales growth between 4% and 5%, with the first half of the year in the low-single digits and the second half of the year in the mid-single digits.
The company now expects Q1 comparable sales to be on the lower end of the low-single digit range provided in the first-half guidance.
CEO Kimball said consumers are still "passionate about beauty," but noted rising economic pressures.
"The level of engagement we see — in social media, and in our stores and online, and all the touchpoints we have — continues to be very strong," Kimball said. "But there's a lot going on. Economically, there's kind of mixed data points."
Kimball noted healthy employment rates and wage growth, but added there are pressures from rising credit card debt and student loan dynamics. More broadly, there are political challenges and global conflicts in the midst of an election year, he said.
ULTA stock tanked 15.3% Wednesday after the comments. Beauty stocks in general felt some of that undertow. Estee Lauder retreated 4.2% while Coty fell 6.3%.
Elf Beauty Stock
ELF stock tumbled 11.9% Wednesday, falling decisively below its 50-day moving average and 10-week line. A hard move below either line in strong volume indicates a sell signal.
Trade volume on Wednesday spiked above 272% the daily average, MarketSurge data shows.
Shares had rallied almost 151% from their Oct. 31 lows to an all-time high on March 4 of 221.83. The company in early February beat Q3 estimates and hiked its outlook. However, Elf's earnings growth slowed over the past three quarters from triple-digit gains.
Investors who bought at the 139.85 entry saw shares rise almost 59% to a March 4 peak. The stock had trimmed that gain to about 33% by Tuesday's close, ahead of Wednesday's sell signal.
Elf Beauty has a 95 Composite Rating out of a best-possible 99. The Composite Rating combines various technical indicators into one easy-to-read score. The stock has a 98 EPS Rating. ELF's relative strength line has been falling from its early March highs and it has a 96 RS Rating.
Elf Beauty leads the Cosmetics/Personal Care Group according to IBD Stock Checkup.
Despite Wednesday's drop, ELF stock has advanced 13.5% in 2024.
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