Some thoughts on ELF

I recently bumped up my ELF allocation to about 7.5%

Some things I like about it:

-Strong potential for international sales
International sales account for ~12% of revenue, with impressive year-over-year growth of over 60%. Expansion in Canada and the U.K. has propelled the Company to the #7 brand in both markets, with a #3 position in the U.S.

Strong Socia Media engagement
On the conference call, management noted it is seeing huge success with social media. The company has run four different TikTok campaigns that have amassed over a billion views each, with its most recent reaching almost 15 billion views. Gen Z is the target consumer and according to Singular Research, Elf boasts 1.1M Tik Tok followers, 6.5M Instagram follower, 116K Youtube followers, and 2.5M facebook followers. Backing this up, the recent Piper Sandler teen survey showed elf up 9%, to 22%, making it the #1 teen cosmetics brand.

The Naturium Acquisition
Naturium’s go-to-market strategy revolves around building relationships with content creators focusing on beauty and cosmetics. Given the obvious overlaps between Naturium’s brand ambassadors, dubbed “skin-fluencers,” and e.l.f.'s ROI from social media, this look like it could be a great match. e.l.f. currently owns about 9% of the skincare market based on retail sales. By adding Naturium to its portfolio, e.l.f. will double its skincare presence overnight. Not to mention, Naturium has grown at a CAGR of 80% over the last 2 years.

-Since Investing is male dominated, this brand is likely underappreciated or ignored at this point.
Much like Ulta Beauty, if Elf’s success continues, it will be too good to ignore, and this could prove to be a catalyst.

Reasonable Price
With the recent 30%+ haircut, it’s selling for a P/S around 8, a PE of 60, and a forward PE of 45, which seems reasonable give they grew Revenue 76.5% last quarter.

More background on ELF, including how it markets itself, social causes, carbon footprint:
The insane rise of e.l.f Cosmetics - YouTube

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