Goldman Sachs Initiates Coverage of Beauty Stocks Amid Challenging Environment
Goldman Sachs has initiated coverage on beauty stocks ELF Beauty Inc (NYSE:) and Coty Inc (NYSE:) in a challenging environment for mass cosmetics. Despite the sector’s 25% year-to-date decline compared to a 15% rise in the consumer staples index, analysts see long-term potential fueled by innovation and the sector’s alignment with health and wellness trends.
ELF Beauty was given a “buy” rating with a $165 price target, highlighting the company’s innovative marketing strategies and robust growth potential. Goldman Sachs sees ELF as one of the fastest growing and most disruptive players in beauty, with continued share gains and growth momentum standing in contrast to softening beauty category trends in the US.
On the other hand, Coty was rated “neutral” with a $9 target, with a balanced risk-reward dynamics. While the company’s prestige fragrance segment has shown resilience, there are concerns about uncertainties in consumer beauty and travel retail, particularly in Asia.
The beauty sector has been under pressure due to slowing growth in China and US retail channel disruptions. However, analysts believe that innovation and the sector’s alignment with health and wellness trends will expand the market, driving long-term growth potential.