Elf Beauty's (ELF) implied revenue guide down for the fiscal fourth quarter confirmed that US consumption trends have slowed materially, Morgan Stanley said in a note e-mailed Friday.

Late Thursday, the cosmetics company reduced its fiscal 2025 sales estimate to a range of $1.30 billion to $1.31 billion from a prior $1.32 billion to $1.34 billion outlook. The earnings guidance moved down to between $3.27 and $3.32 a share from $3.47 to $3.53 previously.

For the fourth quarter, the company expects net sales to be between down 1% and up 2%, Chief Executive Tarang Amin said on an earnings conference call, according to a FactSet transcript. Elf's consumption trends have been "softer" than expected in calendar year 2025, Amin said.

The mass beauty category continued to fall last month, Amin told analysts. "We believe this decline is reflective of consumers stocking up in a highly promotional December, and lower social conversation around beauty."

The company's fourth-quarter outlook implies revenue of between $319.1 million and $329.1 million, which Morgan Stanley said was 15% below Wall Street estimates. The brokerage downgraded its rating on the Elf stock to equal-weight from overweight and slashed its price target to $70 from $153.

The company's shares were down nearly 20% in Friday trade.

"The January slowdown is over a finite few week time period in a light seasonal month, so there is potential for trends to improve," Morgan Stanley wrote. "Net, we move to the sidelines with low visibility."

For its third quarter, Elf reported adjusted EPS of $0.74, unchanged from a year earlier. Net sales jumped 31% to $355.3 million, mainly driven by retailer and e-commerce channels, according to a statement. Analysts polled by FactSet were looking for non-GAAP EPS of $0.76 and sales of $330.4 million.

"Given the dynamics between (the third and fourth quarters), we do not believe (the fourth quarter) is indicative of the underlying run rate of our business, and we remain confident in our ability to deliver market-leading growth," Amin said on the call.