What Happened?
A number of stocks jumped in the morning session after the release of a favorable Consumer Price Index (CPI) report, which showed inflation cooling more than anticipated. The July report from the Bureau of Labor Statistics indicated a year-over-year inflation rate of 2.7%, just below the 2.8% economists had forecast. This suggests that price pressures on consumers may be easing. Particularly beneficial for the sector was the news that the food index remained flat, with grocery prices even declining by 0.1% month-over-month. This development is seen as a positive for the profitability of food, beverage, and personal care companies, as lower input costs and increased consumer purchasing power could boost sales.
The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks.
Among others, the following stocks were impacted:
- Personal Care company Coty (NYSE: COTY) jumped 3.7%. Is now the time to buy Coty? Access our full analysis report here, it’s free.
- Personal Care company e.l.f. Beauty (NYSE: ELF) jumped 5.6%. Is now the time to buy e.l.f. Beauty? Access our full analysis report here, it’s free.
- Beverages, Alcohol, and Tobacco company Celsius (NASDAQ: CELH) jumped 3.3%. Is now the time to buy Celsius? Access our full analysis report here, it’s free.
- Perishable Food company Dole (NYSE: DOLE) jumped 3%. Is now the time to buy Dole? Access our full analysis report here, it’s free.
Zooming In On e.l.f. Beauty (ELF)
e.l.f. Beauty’s shares are extremely volatile and have had 49 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 1 day ago when the stock gained 7.7% on the news that it received a key upgrade from investment bank Morgan Stanley, which expressed renewed confidence in the company's performance. The investment bank upgraded the stock from an “Equal-Weight” to an “Overweight” rating and raised its price target to $134 from $114. Morgan Stanley cited an “attractive entry point” for investors after the shares lost half their value from last year's peak. The bank argued that Wall Street is underestimating the profit boost from recent price increases and the acquisition of Rhode, a fast-growing cosmetics brand. This positive sentiment is echoed by other firms; Deutsche Bank also recently upgraded the stock to a "buy" rating, and Goldman Sachs maintained its "buy" rating while raising its price target to $137. The upgrades follow a period of stock volatility after the company's fiscal first-quarter report.
e.l.f. Beauty is down 4% since the beginning of the year, and at $118.08 per share, it is trading 30.9% below its 52-week high of $170.95 from August 2024. Investors who bought $1,000 worth of e.l.f. Beauty’s shares 5 years ago would now be looking at an investment worth $5,846.
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