Cowen is Sally Beauty (New York Stock Exchange: SBH) and Elf Beauty (NYSE: Elves) on Friday due to weaker consumers and stretched valuations.
Analyst Oliver Chen has downgraded the company’s previous purchase worth ratings. Note that each short-term uplift is limited for beauty-focused companies that retain. Specifically, Chen is the elf (fairy(SBHMore) customers could be hit hard by inflationary pressures.
“SBH is seeing multiple, limited expansions in the near term.
Potential weaknesses due to: exposure to low-income consumers;
Gross margins have declined as promotional activity has increased and pricing benefits have waned, leading to insufficient product diversification for Sally,” he explained.
Shares of Elf Beauty (ELF) and Sally Beauty (SBH) fell about 2% in pre-market trading on Friday.
Chen suggested that Ulta Beauty (ULTA) and Olaplex (OLPX) are better choices in the current beauty arena.
Read more about Olaplex’s recent earnings results.