ELF Beauty leads this weekend's watch list of five stocks near buy points, including four consumer plays. All five stocks, including hospital operator Universal Health Services, have durable sources of demand to weather a somewhat uncertain outlook for consumption and the economy overall. Booking Holdings, Domino's Pizza and Burlington Stores round out the list.
The outlook is in flux, as the Federal Reserve offered a more hawkish forecast of a single rate cut this year. However, that forecast could change if the tame inflation data reported in recent days continues. Meanwhile, initial jobless claims hit a nearly 10-month high of 242,000, a sign that the labor market may be turning soft. If so, that would provide the Fed clear evidence that policy is too tight.
ELF and UHS are both part of the IBD Leaderboard portfolio of elite stocks. ELF also is part of the flagship IBD 50 list of leading growth stocks. DPZ and BKNG are current positions of SwingTrader, which aims to capitalize on short-term trends to rack up a bunch of singles and doubles.
ELF stock, UHS, BKNG and BURL all sport a 97 IBD Composite Rating out of a possible 99, factoring in a range of technical and fundamental factors. Both ELF and BKNG are No. 1 in their industry groups, according to IBD Stock Checkup.
ELF Beauty Stock
ELF was IBD Stock Of The Day on Thursday as the cosmetics and skin care brand neared a buy point from a cup-with-handle base.
On May 22, ELF posted fiscal Q4 results, with sales rising 71% to $321.1 million, driven by a 50% increase in volume and 21% increase in the average price of goods sold. EPS rose 26% to 53 cents.
"The e.l.f. value proposition continues to resonate by offering consumers high quality at accessible price points—with an average retail price point of $6.50 versus analog legacy brands at about $8.00 and prestige brands near $40.00," William Blair analyst Jon Andersen wrote, reiterating an outperform rating after Q4 earnings.
On June 4, Cowen raised its price target on ELF stock to 235 from 190, keeping a buy rating. The firm highlighted ELF's significant potential for expansion in international and skincare markets. ELF put up $355 million last August to acquire the Naturium skincare brand that accounted for 17% of sales in Q4.
ELF slipped 3.9% to 192.63 on Friday, but still climbed 8.4% for the week. On Wednesday and Thursday, ELF made a run at a 202.58 cup-with-handle buy point, according to a MarketSurge analysis.
ELF flashed an early entry last week with a clear move above its 21-day exponential average, breaking a trendline sloping down from its 202.58 handle high. That's still actionable.
Universal Health Stock
Universal Health Services, based in King of Prussia, Penn., operates 27 acute-care hospitals and 333 inpatient behavioral health facilities, as well as outpatient and ambulatory care facilities and a physician network.
Both parts of the business outstripped company expectations in the first quarter, as acute care patient volumes and behavioral pricing moderated less than expected. An upward revision to full-year guidance may come next earnings period "if those metrics remain strong and steady in Q2," CFO Steve Filton said on the April 25 earnings call.
UHS grew revenue 11% to $3.84 billion in Q1, the biggest jump in a number of years. CEO Marc Miller noted that both the acute and behavioral segments are benefiting from "a significant increase in Medicaid supplemental payments. which are helping to compensate for several years of inadequate reimbursement levels."
UBS upgraded Universal Health to buy from neutral on May 20. Analyst AJ Rice wrote that behavioral patient loads are poised to pick up now that an easing of the labor market is allowing the company to increase staffing to meet growing demand.
UHS stock edged up 0.2% to 187.85 on the week, finding support at its 21-day average on Thursday and Friday. UHS is currently in a buy zone, about 3% above a 182.92 cup-with-handle buy point.
The action since UHS broke out on May 30 looks bullish. UHS has etched out a three-weeks-tight pattern, with weekly price changes of no more than 1.5%. That has set up an additional buy point above 190.50.
Booking Stock
Booking Holdings was IBD Stock Of The Day on Wednesday, as it made a run at two separate buy points. The day was a good one for consumer and travel stocks, in general, as the tamest monthly core CPI reading since August 2021 lifted hopes for a Fed rate cut in September.
On June 4, Argus hiked its BKNG stock price target to 4342 from 4200, keeping a buy rating. The firm cited a positive view of the online travel group as a whole, but particularly Booking. Argus highlighted its focus on Europe, the biggest contributor to gross profit.
"Looking at our room night growth by region, in the first quarter, Asia was up mid-teens, Europe and the rest of the world were up high single digits, and U.S. was up low single digits," CFO Ewout Steenbergen said on the Q1 earnings call.
The focus on Europe looks particularly well-timed at the moment ahead of a summer of big tourism events, including Taylor Swift's Eras Tour and the Summer Olympics in Paris.
BKNG rose 1.2% to 3859.10 last week. Wednesday's move lifted BKNG past a 3853 buy point from a handle at the end of a double-bottom base. BKNG is actionable now based on that buy point.
BKNG also has a 3918 buy point from a 17-week flat base, which is also a shallow cup.
Domino's Stock
An in-depth IBD feature this month included Domino's among a narrow list of restaurant chains that were thriving amid a challenging backdrop.
A common thread among the winners: "The companies provide a solid value proposition to customers grappling with a high-cost environment."
Domino's coupon-packages give it a per-person cost advantage. At a Bernstein conference on May 30, Domino's management noted that it was "about to be hit" by a slew of price promotions, according to TheFly. That includes the McDonald's $5 value meal launching June 25 to boost slowing traffic.
Domino's countered with 50% off all pizzas June 6-9, but management noted that its national offer has had staying power.
While reporting better-than-expected Q1 same-store sales growth on April 29, Domino's stood by its long-term targets. Those include annual sales growth of 7%, net store growth of 1,100 per year and 8% operating income growth.
DPZ stock rose 1.5% to 521.41 for the week, despite finishing lower on Thursday and Friday. Domino's is about 4% below a 542.75 buy point from a six-week flat base.
Burlington Stores Stock
Burlington Stores was Friday's IBD Stock Of The Day as the off-price apparel retailer sets up for a new entry after BURL stock surged 17.6% on May 30 on its beat-and-raise Q1 results and guidance.
Following the report, Evercore ISI raised its BURL price target to 274 from 270, keeping an outperform rating. The research firm cited Burlington's 10.5% sales growth as encouraging, but analysts were even more excited about progress on margins.
On the earnings call, Burlington CFO Kristin Wolfe gave an update on supply-chain initiatives to "streamline operations, reduce touches, reduce time to process merchandise, and ultimately save labor dollars" in distribution centers. "In the first quarter, we found we are harvesting these savings a bit faster than we'd originally expected."
Thanks partly to these efforts, Burlington is targeting a margin expansion of 400 basis points over five years, relative to a 6% baseline in 2023.
BURL slipped 0.5% to 228.02 over the past week, edging back below the 232.69 buy point it cleared on May 30. The formation since May 30 is like a high handle, meaning one that forms above the buy point, rather than below it.
A break above the trend line sloping down from the 243.64 handle high could flash a new entry. As of now, a move above 237 would do the trick.
Be sure to read IBD's The Big Picture column after each trading day to get the latest on the prevailing stock market trend and what it means for your trading decisions.
