Bulls Begin to Get Behind Rising e.l.f. Beauty Stock

The analyst note cites growing shelf space at Target for e.l.f. Beauty

by Josh Selway

Published on Apr 16, 2019 at 10:26 AM

e.l.f. Beauty Inc (NYSE:ELF) is trading up 4.8% this morning at $12.11, putting some distance between the stock and its 200-day moving average, while setting it up for the highest close since early December. Sparking the latest move higher from ELF shares is an upgrade to "buy" from "neutral" at D.A. Davidson, which more than doubled its price target on the security to $15 from $7.

Digging into the details, the brokerage firm pointed out that its proprietary data showed the cosmetics concern has significantly increased its shelf space at Target (TGT) stores, overtaking rival Coty's (COTY) Covergirl brand and expanding its lead over its other competitor, NYX Beauty. D.A. Davidson says the stock deserves a higher multiple with more growth on the horizon, and the company could exceed earnings expectations and present a bullish full-year forecast when its reports next month.

There's also been an increase in bullish activity in the options pits, where data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) shows more than 10 long calls have been purchased for every put in the last two weeks. What's more, the Schaeffer's put/call open interest ratio (SOIR) of 0.25 reveals a huge tilt to near-term calls over puts, and this reading's annual percentile rank of 3% means such a call-skew is quite rare.

Of course, some call activity could be from short sellers, who still control 29% of ELF's float, or 8.7 days' worth of buying power, based on average daily trading volumes. In other words, these bears could have bought calls to hedge against more upside from e.l.f. Beauty stock.

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