What happened

Shares of e.l.f. Beauty (ELF 18.72%), a multichannel luxury beauty product brand with distribution at major retailers and online, popped as high as 14.7% Wednesday morning after an analyst upgrade suggested the stock price has upside. The stock is about 8% down as of 3:47 p.m. EDT.

So what

As e.l.f. Beauty stock was beaten down and battered recently, it didn't take much more than a positive analyst note to perk up the stock price Wednesday. Jefferies analyst Stephanie Wissink cited progress made by activist investors, a newly placed CFO, and a potential upside in retail sales trends, with expanded shelf space at some key retailers, as reasons for the upgrade. Wissink slapped a $14 price target, which implies roughly 35% upside from Tuesday's closing price.

collection of beauty products

Image source: Getty Images.

Now what

The upgrade is a rare bright spot for a stock that has shed over half its value since its late-2016 initial public offering.

ELF Chart

ELF data by YCharts.

Despite the positive note, many remain concerned that there is still downside risk to e.l.f. Beauty's revenue because of increasing competition, as well as potential margin pressure from higher advertising spending designed to offset top-line pressure. There's also uncertainty around possible tariffs as the company imports much of its products and materials from China. Investors can enjoy today's pop in stock price, but should take the gains with a grain of salt as management has plenty of work to do improving the top and bottom lines and core business.