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Tariffs Loom Over Key Stocks as 2025 Approaches

Investors brace for 2025 as tariffs take center stage. Constellation Brands, PDD Holdings, and e.l.f. Beauty may face significant challenges impacting stock performance, making it a critical time for investor caution.

Date: 
AI Rating:   4
Tariff Impacts on Key Stocks
As tariffs become more prevalent and complex, investors are closely monitoring companies that are potentially vulnerable, particularly those with significant exposure to imports from countries facing increased rates. Three stocks that stand out are Constellation Brands, PDD Holdings, and e.l.f. Beauty, each facing distinct challenges due to tariffs.

Constellation Brands (NYSE: STZ)
Constellation, which produces all its beer in Mexico, faces a 25% tariff on imported canned beer. This situation threatens profit margins and could lead to increased prices for consumers, potentially decreasing overall demand. The company projects a 2% decline or 1% growth for the current fiscal year. Its earnings per share (EPS) forecast of $12.60 to $12.90 falls short of the expected $13.97 analysts had previously forecasted, indicating a deterioration in profitability outlook. With the shares trading at 13 times projected profits, the unpredictability of tariffs raises concerns about earnings stability going forward.

PDD Holdings (NASDAQ: PDD)
PDD, which operates the online retail platform Temu, could be severely affected as the U.S. government intends to close loopholes allowing low-value imports to enter duty-free. This shift will increase costs and could drastically impact Temu's growth, especially since the company reported a significant 59% year-over-year sales increase last year. If this growth stalls, investors may see a significant sell-off. The forward price-to-earnings ratio of 7 does present an attractive valuation, but the looming tariff changes overshadow this potential.

e.l.f. Beauty (NYSE: ELF)
e.l.f. Beauty, known for its budget-friendly cosmetics, relies heavily on Chinese manufacturing, with around 80% of its products sourced from there. The recent tariff increase to 145% on Chinese imports complicates the company's cost structure and may lead to increased retail prices, further harming its market position. The stock has already seen a decline of more than 55% this year, reflecting investor sentiment regarding these escalating tariffs. Similar to Constellation and PDD, e.l.f. has a forward P/E ratio of 14, which may not be comforting enough when considering the potential volatility in earnings forecasts.

In conclusion, the growing complexity and unpredictability of tariffs pose a significant risk to these stocks. Investors should approach the holding of these stocks with caution while staying attuned to how these tariffs evolve as 2025 approaches.
Stocks:  STZ PDD ELF