On Monday, Piper Sandler adjusted its stance on Olaplex Inc (NASDAQ:OLPX), elevating the stock from an Underweight to a Neutral rating, with the price target increased to $2.00 from the previous $1.25. The revision follows a series of surveys indicating a stabilization in the brand's preference and penetration in salons, which have historically correlated with the company's performance.
The firm's decision to upgrade the rating is influenced by the observation that the previously bearish outlook, which included concerns over worsening trends and overly optimistic rebound expectations, may have played out. Recent data suggests that the downside risks are now more limited, presenting a balanced risk/reward scenario for investors.
Analysts noted that financial estimates for Olaplex have been revised downwards over the past quarters, with the Street's 2024 estimated earnings per share now less than half of what was expected a year ago. This adjustment in expectations contributes to the firm's enhanced confidence in the stock's prospects.
In addition to the data from surveys, Piper Sandler has expressed satisfaction with the interactions with Olaplex's new CEO, Amanda Baldwin. The CEO's acknowledgment of the company's historical challenges and her leadership are viewed as positive steps toward the company's recovery.
The increase in the price target to $2.00 is based on a revised forward-looking EV/EBITDA multiple of approximately 9 times for fiscal year 2025, up from the prior multiple of around 6.5 times. This change reflects the firm's increased confidence in Olaplex's future financial performance.
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