5xing ELF Beauty to Estée

🧠 The Takeaways

Today we’re buying ELF at 50% and going long on the future of Beauty.

1. Scaling more acquisitions

2. Acquire Rare Beauty

3. Knock ourselves off

+ The Coco August Update. TL;DR we crushed it!

LBAB! Community - The Coco August Update

August beat July for CoCo AI's best month ever.

- New record high Rev. (Again.)

- MRR +10% MoM.

- Hit 128% Net New logo target

WE ARE COOKING.

Product:

We Shipped 4 major new features into Beta this month which I’m really excited about. It really rounds out our offering to deliver on the Klaviyo for WhatsApp. 

Follow me on LinkedIn as we drop more info about these features throughout the month. 

Growth:

We hit 128% Net New logo target. The Pre-holiday surge has started. The brands who want to crush the holidays have started building their WhatsApp lists now. 

If you want to get on the WhatsApp train and have a big list that can drive meaningful Revenue for your brand, reply to this email up.

Financials:

We’ve beaten out our Topline + Earnings target for 2 straight months. Cashflow is in a good enough position to scale the team again.

We’re looking to bring on a Founding CSM (Bilingual French + English) who can manage our top accounts and make WhatsApp a Top 3 channel for those brands.

Let’s Examine This Biz

Note: As always, none of what follows is legal, tax, investing, financial, or any other sort of advice. And I was never here.

ELF Beauty’s stock has got hammered in the last year -30% because of fear of consumer demand, but this brand is the little engine that could. 

What started off as the $1-2 knockoff your favorite brand has turned into a portfolio of Beauty and Skincare brands (Elf Cosmetics and Skin, Keys Soulcare, Well People, Naturium, and Rhode) that continues to dominate Social + Retail.

• Share price: $118.15

• Market Cap: $6.7B

• L5 Performance: +536%

• P/E Ratio: 52x

I was willing to buy this thing last year at 2x the valuation, but if the stock is half off, it looks like BFCM came early.

Financial Summary

2024 Financial Statements (YoY Comparison)

Sales: $1.2B (+28%)  👍
Gross Profits: $935m (+29%)  👍
OPEX: $777m (+37%) 👎 

Net Income: $112m (-12%) 👎 

Link to Company’s earnings

TLDR Analysis: Tough but expected

• Rev and Gross Profits are still up. 👍

• OPEX increasing faster than Rev 😰

• Net Income fell but still strong at 8% of Rev. 😐

It’s tough to see them break the streak of 14 straight quarters of Sales + Profit growth. But I love that they’re leveraging cash/stock positions in a slow market and betting the farm on acquisitions and future acceleration.

ELF has ascended from a brand with a successful playbook to a portfolio of related growing, scaling brands. 

This is how discipline in operations and intelligent acquisitions create a powerhouse.

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Let’s Fix This Biz

Here’s how we’ll lay the foundation to 5x this beauty contender.

1) Keep on Acquiring

The $1B acquisition of Hailey Bieber’s Rhode Skin is a massive undertaking and a serious bet-the-farm move, but it isn’t ELF’s first rodeo. 

Over the last 5 years ELF has expanded into a portfolio of brands through M&A:

• 2020: Launched Alicia Keys’ Soul Care through a JV

• 2020: Acquired Well People for $27m

• 2023: Acquired Naturium for $333m

• 2025: Acquired Rhode Skin for $1B

What I love most about ELF: they set a strategy and crawl, walk, run the process. If you go back and look at their growth and earnings, they did this with ELF—founded 21 years ago. 

They’ve staked slow, consistent “boring” wins quarter after quarter year after year.

Then dipped their toe into M&A. Then 10xed their investment. Then tripled from there.

ELF can become the platform brand to acquire/build up-and-coming Celebrity/Influencer Beauty/Skincare/Haircare brands.

They are the scaling, distribution masters that every brand who wants to become a global sensation wants to be acquired by.

Takeaway: Test small. Scale big.

2) Acquire Rare Beauty ($2B)

I know this is kinda the same point as the last one. But it’s so important for ELF that I want to deep dive.

The Rhode acquisition put ELF on the map as a serious beauty contender (vs the cheap dupe brand), but they aren’t at the level of an Estée Lauder, Coty, yet.

All Beauty/Cosmetic brands need to build out a portfolio of Consumer and Prestige brands to hit real scale.

Similar to Toyota making both Toyota (Consumer) and Lexus (Prestige) cars.

ELF was smart enough to know that ELF branding was never going to become Prestige, but through acquiring Influencer/Celebrity brands, they can have their cake and eat it too.

Rare Beauty (Selena Gomez’s $2B beauty brand) as the next acquisition cements ELF as the challenger portfolio that’s already here.

At 2x the valuation of Rhode, Rare fits well in their progression of larger deals, but most importantly, ELF would have anchor brands in each segment.

Consumer:

1. Beauty: ELF Beauty

2. Skincare: ELF Skin

Prestige:

1. Beauty: Rare Beauty

2. Skincare: Rhode, Keys Soulcare

ELF’s 20 yrs of grinding has given them an incredible moment to blitz the incumbents while everyone else works through tariff and consumer confidence worries.

Going on offense and acquiring the hottest up-and-coming Beauty brand would accelerate ELF’s growth by a decade.

And give them the platform to acquire more brands in both categories to continue to expand.

Takeaway: When the playbook is working, press fast forward.

3)  Knock off their own brands.

The interesting challenge ELF is going to eventually have: if it has the most popular brands on the market, the only way to continue to grow/make money will be to knock themselves off.

If ELF hadn’t acquired Rhode, they’d probably create the $3 version of Rhode’s best sellers.

Instead of letting this problem creep into crisis as different brands grow within their portfolio, let’s lean all the way into the original strategy.

Why couldn’t Hailey Bieber be a model for an ELF $3 skincare product in Asia/LATAM? While also promoting the $50 version under the Rhode label.

Whether she’s an influencer for ELF or promoting her own brand, consumers will buy what she endorses because of her influencer status. Their income level will dictate which brand they buy.

Now imagine that across their entire line.

International campaigns with Hailey Bieber, Alicia Keys, and Selena Gomez (🤞🤞🤞) promoting the Prestige products from their own brands + each others + the dupes under the ELF brand.

It’d give ELF the momentum to expand all of their brands internationally, especially into new/developing markets.

In America, Beauty buyers segment by price point:

1. Consumer/Affordable: Ulta

2. Prestige: Sephora

Leverage that trend to push margin in Prestige and volume in Consumer for the hit products everyone wants.

Takeaway: Leverage brand and perception at the right times.

Final Thought

I don’t think ELF gets enough credit for just how incredible of a consumer brand they’ve built over the last two decades.

Especially not in our neck of the woods.

We’ve spent too much of our time talking about DTC Darlings like Allbirds, Casper and Warby Parker (dead, dead,  struggling to scale out of unprofitability).

But ELF gets no love. No case studies. No viral Twitter threads breaking down their meteoric rise.

They’ve grinded away, producing consistent Top + Bottom line growth selling cheap products with massive retail distribution and social virality.

This is the brand all up and coming brands should idolize.

• Consistently topline growing 30%+/yr

• Kicking off $100m+/yr in Net profits 

• Worth $6B+

• With tons of Cash/equity value to fund acquisitions

ELF feels like the embodiment of 

And consumer brands should be studying them ruthlessly on how to grow their own brands.