Beauty stocks continue to shine as a lucrative investment opportunity, driven by consistent growth and innovation in the overall industry. The global cosmetics market is estimated to reach around $661 billion by 2032, increasing from $398 billion in 2023. That’s a compound annual growth rate (CAGR) of around 3.3% from 2024 to 2028, so the sector is showing no signs of slowing down. This growth is fueled by increasing consumer demand for skincare, cosmetics, and personal care products, especially in emerging markets.
But in this volatile market where discretionary spending is down, investing in the right beauty and cosmetics stocks will require analysis of where the companies have been and where they’re going, both financially and strategically. As consumer preferences evolve, companies will need to innovate and meet market demands, ensuring their long-term growth and stability. The three companies on this list are leading the way.
e.l.f. Beauty (ELF)
E.l.f. Beauty (NYSE:ELF) offers high-quality, affordable cosmetics which has earned it a loyal customer base and a strong market presence. But what really sets it apart from its competitors is its strategy of offering new and novel products. “The consumer is becoming less loyal and so they need that newness. They need something constantly innovating…. And that’s what e.l.f. does,” says Piper Sandler senior research analyst Korinne Wolfmeyer.
The company’s newest financial results will be released on August 8, but previous quarter results showed an impressive 78% jump in net sales, reaching $146.5 million for the first quarter of fiscal year 2025. Its gross profits also soared by 60% to $96.1 million, thanks to efficient management and strong consumer demand. E.l.f.’s creative marketing strategies and robust e-commerce performance are driving its growth.
Recently, several analysts have raised their forecasts, and TipRanks has an average price target of $228 which represents a 31% upside. Among beauty stocks, analysts rate E.l.f. as a “strong buy” due to its resilience and ability to maintain profitability despite market challenges.
Shiseido Company (SSDOY)
Shiseido Company (OTCMKTS:SSDOY) is a leading Japanese beauty and cosmetics company that offers a wide range of products including skincare, makeup and fragrances. While the name of the parent company is relatively unknown in the U.S., it manufactures notable brands like NARS and bareMinerals.
While SSDOY is down 30% in the last 12 months and 55% in the last five years, its six month and 30 day results are doing much better. Additionally, Shiseido recently saw a big drop in short interest, meaning fewer investors are betting against the cosmetics stock. This positive shift comes as the company’s stock price has been steadily rising, reflecting growing confidence in its performance.
Shiseido’s strong market presence and improved financial health are key factors driving this optimism. Shiseido reported decent results for Q1 2024, showcasing revenue increase of 4% year-over-year (YOY), which beat estimates. The company’s core brands saw growth of 20%, and there is strong momentum in the Americas and Europe, Middle East and Africa (EMEA) markets.
Additionally, Shiseido is focusing on digital transformation and expanding its e-commerce capabilities, which have contributed to its robust performance. Restructuring efforts and strategic investments in innovation will sustain its growth trajectory moving forward.
Beiersdorf (BDRFY)
Headquartered in Germany, Beiersdorf (OTCMKTS:BDRFY) is a global leader in the skincare and cosmetics industry, known for its strong portfolio of trusted brands including NIVEA and Eucerin. These brands have a loyal customer base and are recognized for their high quality and effectiveness, making Beiersdorf a staple in households worldwide, even if you don’t know the parent company’s name.
Beiersdorf recently reported record-breaking sales, reaching $10.3 billion in 2023. Impressive growth in key segments fueled this remarkable achievement, with NIVEA seeing a 16.2% increase and the Derma business expanding by 24%. These figures underscore the company’s robust market position and ability to innovate and meet consumer needs effectively.
Beiersdorf has a proven ability to grow and adapt in a competitive market but it also has a lot of expansion opportunities in emerging countries as disposable income is increasing in those areas. Many of its brands are becoming more popular internationally, and this provides Beiersdorf with new sale channels.
As far as beauty stocks go, it’s also a nice plus that BDRFY offers a 0.7% dividend yield. Although the yield is modest, it adds an additional appeal to investing in this growth-oriented cosmetics stock.
On the date of publication, Philippa Main did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.
