Mark your calendars, because we may have just witnessed a once-in-a-generation event… Jim Cramer, the man whose stock picks have become an inverse ETF’s dream, was actually right about something. No, I’m not talking about his sudden love affair with Bitcoin (though give it a few months, and that’ll probably hit $1 million). I’m talking about his cautious take on E.l.f. Beauty and their tiny little problem of being 80% reliant on Chinese manufacturing.

Earlier this week on Mad Money, Cramer gave his two cents: “I'm very uncomfortable buying something that is all sourced in China given the fact that we don't know what the president's going to do if China doesn't play ball.” And like a cruel joke, E.l.f. heard him loud and clear… today, the stock promptly crashed 20%.

For the uninitiated, E.l.f. Beauty has been one of those rare cosmetics brands that Gen Z actually loves, largely because they offer bougie-brand quality at drugstore prices. The brand's whole schtick is being really, really good at making viral products that mimic high-end competitors… at a fraction of the cost. But now, there’s a problem. Sales were "soft" in January (a concerning trend for a company that had been defying gravity). Their profit margins took a 36% crash… not exactly what you want to see when your entire playbook is based on affordability. Then there’s the dreaded China exposure. 80% of E.l.f.’s supply chain is based in China, which is less than ideal when there’s a very real chance of new tariffs or political volatility.

E.l.f. reported holiday sales that beat expectations but also delivered profit numbers that disappointed, with net income dropping from $26.9 million last year to just $17.3 million this quarter. That’s a 36% decline in case you can’t do math.

CEO Tarang Amin tried to put a positive spin on things, pointing to two major reasons for the sudden slowdown. First, the TikTok problem… apparently, people weren’t posting as much about beauty products because they were too busy panicking about whether the platform itself was getting banned. Then, the LA wildfires… a natural disaster that understandably shifted consumer focus away from “Which lip gloss should I try?” Not to be insensitive, but that only affected one of 50 states, so it’s a stretch to pin this whole mess on it.

While those explanations may have some merit, the real issue is that E.l.f. Beauty’s guidance for the year ahead isn’t looking any better. Their full-year sales projection dropped below your favorite analysts' expectations, with expected earnings per share falling between $3.27 and $3.32… a steep cut from their prior range of $3.47 to $3.53.

The bigger issue, as Cramer actually (somehow) correctly pointed out, is E.l.f.’s reliance on China. If tensions between the U.S. and China escalate, and tariffs on Chinese imports increase, guess who’s eating that cost? E.l.f. is already preparing for a 10% tariff, and while CEO Amin says that’s “better than what they were expecting,” he also left the door open for price hikes.

And here’s the thing… E.l.f. built its brand on being the affordable beauty alternative. If they start jacking up prices to offset tariffs, that erodes the exact appeal that made them a $1.3 billion revenue machine in the first place.

So… Is E.l.f. Done? Not necessarily. Even though the stock took a hit, revenue was actually up 31% year-over-year, and the brand still dominates the budget-beauty market. They’re growing, just at a slower pace. If they can manage the China issue and keep their pricing competitive, they could bounce back. People forget that makeup is a powerful thing.

In my opinion, the bigger story here is Jim Cramer getting a W. So, congratulations, Jim. You finally nailed one. But don’t get too comfortable… History suggests your next pick might be going viral for all the wrong reasons.

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Stock.News does not have positions in companies mentioned.