Analyst coverage of Oddity Tech has begun a week after the beauty-products company posted solid growth in its first earnings report since it went public on July 19.
Potential for Short-Term Gains
The consensus on Wall Street is that while the company has good prospects, recent gains in the share price limit the potential for short-term gains. Truist analysts initiated coverage of Oddity (ticker: ODD) at Hold with a price target of $54 in a Monday note, calling it "a key disrupter" in beauty and wellness, which the firm said is a $600 billion market "dominated by multi-brand brick-and-mortar retailers."
Oddity's Unique Approach
In 2022, online sales were responsible for only 21% of total sales in the industry globally, according to Euromonitor, a market research company. But there isn't much incentive for more established brands to disrupt their business models to quickly fill that gap, the Truist analysts argued.
Oddity, on the other hand, is a pure play, direct-to-consumer model that aims to disrupt this massive industry through technology and proprietary data leverage at scale, they wrote.
Online Brands and Personalized Shopping Experience
Currently, the company has two online brands: IL Makiage and Spoiled Child. Rather than selling through stores, the company offers its makeup online, using sophisticated quizzes to figure out what products might suit customers. Truist anticipates about 20% top-line growth and margins of 20% or more over the next several years. It expects the launches of a third and fourth brand, which the company plans for 2025, to boost growth.
Oddity Stock Shows Strong Performance Following IPO
Oddity stock has witnessed a remarkable rise, surging by approximately 50% from its initial public offering (IPO) price of $35, as reported by Dow Jones Market Data. However, a recent setback occurred on Monday when the stock experienced a 10% dip, settling at $46.94.
Experts from Truist have evaluated Oddity's performance post-IPO and consider it to be fairly valued. Truist estimates an enterprise value that is 20.9 times the adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) projected for 2024.
BofA analysts share a similar sentiment in their recent report, rating Oddity shares as Neutral. They have set a price target of $60 while acknowledging the company's potential to seize market share from established brands in the sector through its technological expertise. However, they express caution due to the stock's strong recent performance and valuation compared to these older players, suggesting limited potential for multiple expansion.
Goldman Sachs has also weighed in on Oddity, initiating coverage with a Neutral rating and a price target of $59. They highlight the stock's strong growth potential but also consider it fairly valued.
Positive Financial Outlook
Oddity recently announced impressive second-quarter revenue and adjusted earnings, both surpassing the figures from the previous year's quarter. This positive performance has led to an upward revision of financial forecasts for the full year.