On Wednesday, Telsey Advisory Group adjusted the price target for Olaplex Inc (NASDAQ:OLPX) shares, raising it to $3.00 from the previous $2.00 while maintaining a Market Perform rating on the stock.
The firm's decision follows the company's second-quarter results, which, according to Telsey, aligned with Olaplex's internal expectations but presented a mix compared to market anticipations.
The company exhibited better expense control and sales that met forecasts but faced a weaker gross margin, leading to an adjusted EBITDA shortfall. Notably, Olaplex broke a six-quarter streak of year-over-year declines across all three channels, with its retail sector showing positive growth in the second quarter of 2024.
The analysis by Telsey highlights the impact of CEO Amanda Baldwin's leadership since her appointment in December 2023. The initiatives and strategies she has implemented are seen as stabilizing the business, which had previously suffered from operational challenges and a difficult macro-operating environment. Olaplex has reiterated its annual guidance for the second consecutive quarter.
The company is expected to benefit from a fresh perspective and new ideas with a fully established leadership team, including the recent additions of COO/CFO Catherine Dunleavy starting August 13 and CMO Katie Gohman, who began on July 15. Telsey notes that the conservative outlook provided by the company allows the new leadership team to apply and execute new strategies effectively.
While significant changes often require time, and visibility into future growth and profitability might be challenging, Telsey acknowledges the company's ability to maintain guidance in a tough environment and the stabilizing trends observed.
The revised price target of $3.00 represents an 11.0x multiple on Telsey's two-year forward adjusted EBITDA estimate for Olaplex, compared to a historical one-year average next twelve months (NTM) multiple of 12.0x and a recent multiple of 8.3x.
In other recent news, Olaplex Holdings Inc. (NASDAQ:OLPX) reported second-quarter earnings for fiscal year 2024, disclosing net sales of $103.9 million and adjusted EBITDA of $32 million. Despite a 4.8% year-over-year decline in net sales, the company retains its full-year net sales forecast of $435 million to $463 million.
Olaplex also launched a new patented technology, Olaplex bond shaping technology, targeted at the curly hair market, and welcomed Catherine Dunleavy and Katie Goeman to the executive team as COO/CFO and CMO, respectively.
These recent developments show that Olaplex is making strategic moves to bolster its market position. The company anticipates improvements in the latter half of 2024, expecting benefits from salon pallet kits, new product launches, and a seasonal lift in Q4. Adjusted gross profit margin is projected to expand by 110 to 170 basis points, while adjusted SG&A expenses are expected to rise due to sales and marketing investments.
Despite the second-quarter sales decline attributed to the company's strategy of rationalizing business with certain distributors, Olaplex sees a significant opportunity in the curly hair market. The company remains optimistic about the long-term potential of the brand and its transformation journey.
InvestingPro Insights
Recent data from InvestingPro provides a deeper look into Olaplex Inc's financial health and market performance. With a market capitalization of $1.45 billion and a robust gross profit margin of 71.49% over the last twelve months as of Q2 2024, the company demonstrates a strong ability to generate earnings relative to its revenue. This impressive gross profit margin is a critical factor in the company's operational efficiency and could be a signal of strong financial management under the new leadership.
On the growth front, the company has seen a decline in revenue growth by 17.37% over the last twelve months as of Q2 2024, which aligns with the mixed results noted by Telsey Advisory Group. Despite this, Olaplex's liquid assets exceed its short-term obligations, indicating a solid liquidity position that may support the company's ongoing strategies and investments. Furthermore, with a Price to Earnings (P/E) ratio of 26.32 and an adjusted P/E ratio of 26.05, the valuation suggests that investors may expect a strong free cash flow yield, as highlighted by one of the InvestingPro Tips.
Olaplex's recent market performance also shows a notable strong return over the last month, with a 56.79% price total return, which could reflect investor confidence in the company's trajectory and the effectiveness of the new leadership's strategies. For readers interested in a more comprehensive analysis, InvestingPro offers additional insights and tips on Olaplex Inc, which can be accessed through their platform.
Investors seeking further guidance can explore 9 additional InvestingPro Tips to better understand Olaplex's market position and potential investment opportunities. With the next earnings date set for November 6, 2024, market participants will be keenly watching how the company's efforts under the new leadership team translate into financial performance.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.