In the latest earnings report, e.l.f. Beauty, the cosmetics company, outpaced market expectations for the first quarter of Fiscal 2025, yet saw its shares take a tumble in after-hours trading. The solid beat-and-raise results were overshadowed by a revised full-year earnings outlook that fell short of analysts' expectations.

Despite the company's exceptional performance in Q1 FY25, with net sales soaring nearly 50% year-over-year to $324.48 million, and adjusted earnings per share (EPS) of $1.10 surpassing estimates, e.l.f. Beauty's shares plunged by over 10%. The company credited continued demand momentum and consistent performance in both retail and e-commerce channels for its sales growth.

Anticipating sustained growth, e.l.f. Beauty revised its full-year outlook upwards. The company now projects net sales for Fiscal 2025 in the range of $1.28 billion to $1.30 billion, reflecting a 25%-27% annual increase. Similarly, adjusted EPS is forecasted between $3.36 and $3.41. However, these upward revisions failed to meet market expectations, with analysts anticipating net sales of $1.30 billion and adjusted EPS of $3.42.

The dip in e.l.f. Beauty's shares may be attributed to hedge funds selling their stock. Data from TipRanks' Hedge Funds Trading Activity tool indicates that hedge funds decreased their ELF holdings by 165,800 shares in the last quarter. Currently, the hedge fund sentiment towards e.l.f. Beauty is rated as Very Negative.

Despite the recent downward trajectory, Wall Street remains highly optimistic about e.l.f. Beauty's future potential. With a Strong Buy consensus rating on TipRanks, based on 12 Buy recommendations and two Holds, the average price target for e.l.f. Beauty is $228.30. This implies a promising 21.5% upside potential from current levels.

Throughout this year, e.l.f. Beauty's shares have gained more than 30%, reflecting the company's consecutive quarters of net sales growth and market share gains. While the revised outlook may have disappointed some investors, the steady growth and positive market sentiment suggest that e.l.f. Beauty has a strong foundation to navigate the challenging cosmetics industry landscape in the upcoming months.