Citigroup has launched coverage on e.l.f. Beauty, assigning a Buy rating, after assessing its ability to achieve growth rates above its beauty sector counterparts alongside a recovery in margins. The firm’s shares recently experienced a notable downturn, which Citi attributes largely to short-term factors.
Analysts forecast e.l.f. Beauty to attain a 16% compounded annual revenue growth over the next three years. This anticipated expansion surpasses growth rates of peer companies in the beauty industry. Key contributors to this outlook include continued market share increases for the primary e.l.f. brand and broader market penetration of the rhode brand, which e.l.f. recently acquired.
Citi anticipates acceleration in growth following the second half of fiscal year 2026. This rebound is expected to be supported by a planned 14% price increase scheduled for August 2025, better synchronization between product shipments and consumer demand, and enhanced retail presence focused on the rhode brand. By fiscal 2027, the bank projects that organic sales growth will comfortably return to double-digit figures.
In terms of profitability, Citi identifies potential for margin improvement within the next year. The firm notes that e.l.f. Beauty is overcoming the adverse effects of China tariffs, which it estimates imposed an annualized pressure of approximately 380 basis points on margins during fiscal 2026. Additionally, pricing actions combined with the incorporation of the rhode brand, which demonstrates a higher margin profile than e.l.f.’s core brand, are expected to underpin profit expansion.
Specifically, Citi reports that rhode maintains an approximate gross margin of 81%, compared to 71% for the main e.l.f. brand. Operating margins similarly favor rhode, at about 33.5%, relative to 18.5% for e.l.f. overall. The acquisition is estimated to contribute around 15% accretion to earnings per share.
The recent 35% share price decline following e.l.f. Beauty’s fiscal second-quarter 2026 results is viewed by Citi largely as a reaction to transient challenges, including inventory adjustments and the comparative basis of prior distribution expansion. Hence, Citi perceives the current market entry point as favorable.
The firm assigns a price target of $110 per share, based on an enterprise value to EBITDA multiple of roughly 18 times fiscal 2027 estimates, or a price-to-earnings multiple close to 31 times for the same period. Citi underscores that e.l.f.’s valuation is reasonable in light of its superior growth prospects relative to household and personal care sector peers.