Why e.l.f. Beauty Stock Plummeted 34.2% Last Month But Is Gaining in April

Shares of e.l.f Beauty (NYSE: ELF) got crushed in March's trading. The cosmetics specialist's stock fell 34.2% in a month that saw strong bearish momentum for the broader market. The S&P 500 index fell 5.1% across the stretch, and the Nasdaq Composite declined 4.8%.

The stock market faced pressures connected to the war in Iran last month, and e.l.f. Beauty saw outsized sell-offs. The stock also saw pullbacks in conjunction with new coverage from analysts.

The Iran war and analyst coverage created significant pressures

The U.S. and Israel's war with Iran kicked off at the end of February and roiled the stock market in March. In addition to the general surge for bearish sentiment created by the war, the conflict also had some business-specific implications for e.l.f. Beauty.

As a result of the war, Iran effectively closed the Strait of Hormuz -- a key shipping line for oil. The development caused a surge in global crude oil prices that created ripple effects across various industries.

Some of e.l.f. Beauty's products include petrochemicals as key ingredients, and rising oil prices can be expected to increase production costs for the company. As a result, the company's share price faced much stronger bearish pressures than the broader market last month.

Making matters worse, Piper Sandler published new coverage on the company on March 9 and stated that its analysis showed that consumption of the company's products in February had come in between flat and down 5% when compared to January's levels. Canaccord then published a note on the stock on March 26 and lowered its one-year price target from $136 per share to $121 per share, although it maintained a buy rating on the stock overall. Deutsche Bank then published its own coverage on the company on March 30, lowering its price target from $95 per share to $68 per share and maintaining a hold rating on the stock.

e.l.f. Beauty stock has moved higher in April

Following last month's huge sell-off, e.l.f. Beauty has seen some recovery momentum in April's trading. The company's share price is up 5.3% in the month as of this writing. Across the same stretch, the S&P 500 is up 3.7%, and the Nasdaq Composite is up 4.8%.

The stock market has been moving higher this month thanks to indications that the Iran war is de-escalating. President Donald Trump announced yesterday that Iran had agreed to a two-week ceasefire and reopening the Strait of Hormuz as negotiations proceed. While that's definitely a positive development for e.l.f. stock and the market at large, investors should understand that there is still a significant risk that the situation could deteriorate.

Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends e.l.f. Beauty. The Motley Fool has a disclosure policy.