Goldman Sachs Coverage on Beauty Stocks

Investing.com — Goldman Sachs has initiated coverage on beauty stocks ELF Beauty Inc (NYSE:ELF) and Coty Inc (NYSE:COTY) amid a challenging environment for mass cosmetics.

ELF Beauty Performance

Shares of ELF Beauty increased by 4% after the brokerage started with a "buy" rating and a price target of $165, praising the company's innovative marketing strategies and strong growth potential.

Goldman Sachs identified ELF Beauty as a standout performer within a sector facing 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,” the analysts stated.

Market Challenges

The beauty sector is down 25% year-to-date, contrasting with a 15% rise in the consumer staples index, and is pressured by slowing growth in China and disruptions in the U.S. retail channels.

However, analysts believe there is long-term potential driven by innovation and the sector's increasing alignment with health and wellness trends, which are expanding the market.

Coty Inc. Evaluation

Coty Inc. has been rated "neutral" with a target price of $9, reflecting a balanced risk-reward scenario. The brokerage noted resilience in its prestige fragrance segment but highlighted uncertainties in the consumer beauty and travel retail sectors, particularly in Asia.