There Is Some Light At The End Of The Tunnel - Here's Why Analyst Remains Bullish On This Beauty Company

  • Truist Securities analyst Bill Chappell reiterated a Buy rating on the shares of Olaplex Holdings, Inc. OLPX with a price target of $15.
  • The analyst's key takeaways from meetings with management include the following: the brand remains strong with a solid performance from recent dry shampoo launch despite negative headlines and a better understanding of plans to step up marketing and partner engagement in 2023.
  • A lawsuit representing 70 women was filed against the company on February 9, claiming that OLPX's products caused hair loss.
  • The analyst has found dozens of testimonials from stylists and consumers online refuting the accusations and singing the praises of the product.
  • The analyst believes the lawsuit is not fatal and will not create a long-term impairment of the brand.
  • Beyond the fact that dry shampoo is a new segment for the company, which could become a meaningful revenue stream, the analyst also views it as a testament to the brand.
  • If there were prevalent concerns about the safety of the products, the analyst would have expected it to impact new product launches.
  • Management clearly acknowledged that the suit/headlines would impact the business in the near term.
  • The analyst believes the guidance and the current stock price more than factor in that impact.
  • The analyst believes the shares are one of the most compelling from a risk/reward standpoint in 2023 based on the solid margins/profitability, patented technology, and highly loyal existing base.
  • Price Action: OLPX shares are trading higher by 1.80% at $3.94 on the last check Monday.
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