Investing.com — Goldman Sachs initiated coverage on beauty stock ELF Beauty Inc (NYSE:ELF) and Coty Inc (NYSE:COTY) amid a challenging environment for mass cosmetics.
Shares of ELF Beauty were up 4% after brokerage started with a “buy” rating and a $165 price target, on company’s innovative marketing strategies and robust growth potential.
Goldman Sachs highlighted ELF Beauty as a standout performer in a category grappling with slowing demand and retail disruptions.
“We see ELF as one of the fastest growing and most disruptive players in beauty. The company’s continued share gains and growth momentum stand in sharp contrast against softening beauty category trends particularly in mass color cosmetics in the US,” analysts wrote.
The beauty sector, down 25% year-to-date compared to a 15% rise in the consumer staples index, has been pressured by slowing growth in China and U.S. retail channel disruptions.
However, analysts see long-term potential fueled by innovation and the sector’s alignment with health and wellness trends, which are expanding the market.
Coty Inc. was rated “neutral” with a $9 target, with a balanced risk-reward dynamics. Brokerage noted resilience in its prestige fragrance segment but flagged uncertainties in consumer beauty and travel retail, particularly in Asia.
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