e.l.f. Beauty's (ELF) recently acquired brand Rhode had a "strong" launch at Sephora, which was the largest brand launch at the beauty retailer to date, BofA Securities said in a Wednesday note.

Elasticities have been "holding up well" as price increases on the company's products in August have offset the drop in volume, BofA analysts said, citing recent data from Nielsen. The elasticities should continue to dampen fiscal Q2 margins but will be offset by an improved product mix from new fall innovations and contribution from Rhode, the analysts said.

The company's stock has been volatile this year mainly due to its exposure to tariff impacts due to its heavy reliance on Chinese manufacturing, which accounts for 75% of cost of goods sold, according to the note. The company is working to mitigate this by diversifying outside of China, the note said.

The analysts increased their estimated fiscal 2026 sales growth to 26% from 25%, with "slightly better" Rhode sales contribution in fiscal Q2 expected and improving trends in price increases providing upside to sales growth.

BofA reiterated the company's stock rating at buy and raised the price target to $160 from $135.

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