E.l.f. Beauty (ELF) faces slowing demand in its core cosmetics business in fiscal 2027, while pricing investments, innovation efforts and higher costs create uncertainty despite continued strength in skin care and rhode expansion, Morgan Stanley said in a note Thursday.

The investment firm said the main e.l.f. cosmetics brand, which makes up about two-thirds of retail sales, has slowed and could be flat to slightly higher in fiscal 2027 based on its estimates. The company plans targeted price cuts and more product launches to improve demand.

However, Morgan Stanley said the benefit remains uncertain and lower prices could weigh on sales.

Skin care remains a stronger part of the business, helped by rhode, Naturium and e.l.f. Skin. Morgan Stanley said rhode's long-term staying power remains unclear in a crowded beauty market. However, the brand still has room to expand through more stores, more countries and new products, including a planned Sephora expansion in Europe in Sept. 2026.

Fiscal Q4 results were better than expected, helped by rhode, while fiscal 2027 guidance was roughly in line with estimates but does not include possible cost pressure or planned pricing moves.

Morgan Stanley kept an equal-weight rating for e.l.f. and cut its price target to $59 from $67, citing weaker near-term demand, slower share gains, pricing risk and higher cost uncertainty.

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