e.l.f. Beauty, Inc. (NYSE: ELF) has been downgraded to Equal-Weight from Overweight by Morgan Stanley on Monday. Despite the downgrade, analysts raised the price target to $168 from $137 per share.

Morgan Stanley’s note on U.S. consumer stocks suggests that “the topline landing is here,” and they anticipate shifting themes within 2024. The downgrade for ELF is based on two main factors. Firstly, the analysts believe that the current valuation reflects ELF’s growth opportunity, given the substantial increase in the stock price, including a tenfold rise since the beginning of 2020 (pre-COVID) and a nearly tripled value since the start of 2023.

Secondly, Morgan Stanley points out that e.l.f. Beauty faces more challenging corporate and U.S. scanner data sales growth comparisons ahead, particularly after the soon-to-be-reported FQ3. This could lead to near-term fundamental and stock price volatility, according to the firm. They also highlight an “unfavorable bull/bear skew near-term” in the stock.

Despite the near-term challenges, Morgan Stanley still views e.l.f. Beauty as a compelling long-term growth story from a fundamental standpoint. The downgrade is seen as a reaction to the stock’s recent run-up and potential headwinds in the short term.