2/7/25 - $elf - I bought $66 AH, BUT... nuanced

2/7/25 :: VROCKSTAR :: ELF
I bought $66 AH, BUT... nuanced

- this will become a name i follow/ comment on a A LOT more in the coming year
- sub 20x PE is already "value", but it's not "obvious"
- it's not obvious for the simple reason that we don't have a resolution on growth trends until we see more scanner data and another quarter
- while new launches (product, doors e.g. Wmt, DG and geos) should bode well for a brand that is gaining share - and honestly - share gains are more important than category softness... we need more data
- in this tape, unfortunately, this type of reaction is "justified" as silly as it looks
- if you zoom out, the mgns remind me of HQ software, and it's not unreasonable to say put 5x on 1.5 bn of fwd year sales and get to 7.5 bn EV which puts this stock at closer to $135 in a 12-18 mo time frame.
- given stock is at mid 60s, that's nearly a 2x, even risk adjusted
- MIND THE GAP in the low 60s, given the first one (in the mid 80s) filled - see the gray horizontal bars on this chart.

TL;DR... downside likely 15-20% (and probably market-related in the short-term just "fine") and upside probably also 10-25%... so BALANCED. but all else equal, the upside is much more (and possibly has the ability to compound). so the stock *is* a buy here, but it needs to be risk adjusted and ST expectations tempered. I'm at 2% and will park here. as you know i've been stacking high cash (40% of book as of last night), and this is a good parking spot. i won't be trading this one around, just adding each 5% lower.

V