e.l.f. Beauty, Inc. (NYSE:ELF)’s growth story right now has a very famous face behind it. Rhode, the skincare and makeup brand founded by Hailey Bieber, was bought by e.l.f. for $1 billion a year ago. It contributed about $160 million of the $479.4 million in sales the company posted last quarter, helping total sales climb 36% and beat Wall Street’s expectation of $431.2 million. By contrast, the core e.l.f. Brand actually declined.
Ulta Beauty, Inc. (NASDAQ:ULTA) told a very different story earlier this summer: its fiscal first-quarter sales climbed 11% to $3.16 billion as wealthier shoppers traded up to prestige brands.
Why This Matters
Both retailers just beat expectations, but e.l.f. Beauty, Inc. (NYSE:ELF)’s growth is now riding almost entirely on one celebrity-founded brand while its own namesake line shrinks. Ulta’s is coming from affluent shoppers splurging on prestige names.
That leaves a real question: is e.l.f.’s Rhode-powered growth a sign of real momentum, or a company becoming dangerously dependent on a single brand?
The Bull and Bear Case: E.l.f. Beauty
Rhode’s appeal goes well beyond its Gen Z fanbase. CFO Mandy Fields said “everybody looks at her and aspires to do what she’s doing,” adding that women in their 40s are lining up for Rhode products too, a sign the brand isn’t confined to one age group. Rhode’s narrow, curated approach, going deep on a handful of categories like blushes, lips, and bronzer rather than chasing one viral hit, has driven strength broadly across its lineup. e.l.f. Beauty, Inc. (NYSE:ELF) also raised full-year guidance meaningfully: adjusted EPS to $3.50-$3.55 from $3.27-$3.32 and sales to $1.94 billion-$1.97 billion from $1.84 billion-$1.87 billion, both ahead of Wall Street’s prior estimates. Management said trends for the core e.l.f. brand have already started improving, and it expects growth across every brand for the rest of the year. Profit also got a boost because Rhode outperformed the earnout targets set in the acquisition deal, prompting e.l.f. to record a $16.1 million fair value adjustment.
However, the headline profit doubling comes with a catch. Fiscal first-quarter profit rose to $66.6 million, or $1.12 a share, from $33.3 million, or 58 cents a share, a year earlier. But tariff refunds linked to duties the Supreme Court struck down added roughly 68 cents of that per-share gain on their own, a one-time benefit that won’t repeat next quarter. Remove that, and actual earnings growth looks far more modest. More importantly, the core e.l.f. brand, the business that built the company, actually declined this quarter, which means virtually all of the reported growth is coming from a brand e.l.f. only acquired a year ago. That’s real concentration risk: if Rhode’s momentum with Bieber’s fanbase ever cools, e.l.f. Beauty, Inc. (NYSE:ELF) doesn’t have much else growing right now to fall back on.
The Bull and Bear Case: Ulta Beauty
Ulta Beauty, Inc. (NASDAQ:ULTA)’s growth was broad-based. Sales at existing stores surged 5.3%, beating Wall Street’s expectation of 4.7%. Customers spent more per visit and made more total trips, which is a healthier sign than just raising prices. CEO Kecia Steelman said Ulta is gaining prestige beauty share from brands like Estee Lauder even as mass beauty stays flat. Celebrity brands, including Fenty, Rare Beauty, and Cecred, plus a TikTok Shop push and AI tools like Gemini, are pulling in younger shoppers. Ulta’s loyalty program has grown to 47 million members from 17 million eleven years ago, and the company now uses an algorithmic “beauty graph” to personalize recommendations at scale.
However, Steelman herself flagged that shoppers “continue to face macroeconomic uncertainty,” with value becoming more important. This means Ulta’s growth is increasingly concentrated among wealthier households while lower-income consumers pull back.
Insider Monkey’s Hedge Fund Data
Ulta Beauty, Inc. (NASDAQ:ULTA) was held by 56 hedge funds as of Q1 2026, down slightly from 58. e.l.f. Beauty, Inc. (NYSE:ELF) was held by 39 funds, up from 38. For comparison, Estee Lauder had 47 hedge fund holders, and Coty had 32. Ulta is the most liked of the four among hedge funds, followed by Estee Lauder, then e.l.f., then Coty.
Conclusion
Ulta’s growth looks broad-based and repeatable while e.l.f.’s looks powerful but concentrated almost entirely in one acquired brand carrying the whole story right now.
Overall, hedge funds favor Ulta Beauty, Inc. (NASDAQ:ULTA) over E.l.f.
While we acknowledge the risk and potential of ELF as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than ELF and that has 10,000% upside potential, check out our report about this cheapest AI stock.
READ NEXT: Hedge Funds Are Bullish on DXC Technology (DXC) and Blackstone Inc. (BX)’s Profit Jumped 26% on AI Bets but the Stock Barely Moved. Here’s Why.
Disclosure: None. This article is originally published at Insider Monkey.
Hedge Fund Resource Center