e.l.f. Beauty (NYSE:ELF) shares rose more than 3% intra-day today after BofA Securities raised its price target on the company to $165.00 from $155.00 while maintaining a Buy rating. The new price target represents the Street high.
This was followed by the company’s announcement on Tuesday, according to which it has signed a definitive agreement to acquire the skincare brand Naturium, which represents its largest acquisition to date. The deal is valued at $355 million, combining cash and stock, implying valuation multiples of 4x sales and 21x adjusted EBITDA. The bank expects e.l.f. Beauty to double its percentage of sales in skincare from 9% to 18%.
“Naturium expects to see $90m in sales and $17m in EBITDA for the fiscal year ending 3/31/24. ELF expects Naturium to add $48m in sales and $9m in adj. EBITDA following the close of the acquisition around 9/30, or halfway through ELF’s fiscal year,” mentioned BofA.
The bank adjusted its adjusted EBITDA estimate for fiscal 2024 to $225M from the previous $216M. e.l.f. Beauty had previously issued guidance for fiscal 2024, expecting net sales within the range of $792M to $802M, reflecting a year-over-year increase of 37% to 39%. Gross margin is projected to rise by 150 basis points year-over-year, with adjusted EBITDA estimated to range between $171M and $174M.
“We continue to view margin guidance as conservative given benefits from mix and lower transportation costs, partially offset by higher marketing spend at 22-24% of F24 sales,” added BofA.