Investing.com -- Evercore ISI initiated coverage of e.l.f. Beauty with an in-line rating and a $68 price target in a note on Thursday, arguing that the cosmetics company's core U.S. makeup business is showing signs of maturity that cast doubt on Wall Street's expectations for sustained double-digit sales growth.

Analyst Javier Escalante noted that e.l.f. is evolving from a disruptive makeup brand into a multi-category platform increasingly open to acquisitions, but questioned whether the company has a strong enough core business to support that narrative.

"The key debate is whether overdistribution and acquisitions are masking a maturing core," Escalante wrote.

Evercore flagged declining shelf productivity, a channel mix shift toward online that pressures margins, and L'Oréal regaining ground among Gen Z, Hispanic and lower-income consumers. These are the cohorts Escalante described as having built e.l.f.'s scale.

The firm believes these dynamics justify a re-rating back to e.l.f.'s pre-hypergrowth 30% discount to L'Oréal.

“An increasingly binary setup, with downside risk more likely. Our bull case of $173 (~175% upside), if the stock rerates with a reacceleration of makeup share gains and acquired brands Naturium and rhode demonstrate durability,” wrote Escalante.

“Conversely, our bear case of $41 ~(35% downside), if organic sales converge to 2-4% U.S. beauty market growth and profit pressures further de-rerate the stock to a trough 50% discount to L’Oréal.”

Near-term catalysts are said to include Naturium's entry into Walmart, e.l.f.'s shelf expansion at Ulta expected by late April, and the fiscal 2027 outlook due in late May.