Beauty Health Stock Hit With Downgrade At Stifel: What Investors Need To Know

Amidst growing uncertainties and revised growth forecasts, Stifel Financial Corp SF on Monday hit Beauty Health Co SKIN with a downgrade, causing shares to sink more than 13% before a slight rebound.

The SKIN Analyst: Jonathan Block downgraded Beauty Health from a Buy to a Hold Rating, and lowered the price target from $17 to $10, reflecting growing concerns about the company’s future growth, particularly in 2024 and beyond.

Check out SKIN’s analyst ratings.

The SKIN Takeaways: While there are no immediate concerns about the near-term performance, Block’s research found that the future growth potential could be underwhelming due to possible deceleration in the growth of HydraFacial's booster attachment rate and less-than-expected results from the Syndeo platform.

One of the key concerns revolves around the increasing booster attachment rates that have been a significant driver for consumable revenue growth in the past. If growth decelerates and Syndeo upgrades underwhelm, it could pose risks to future estimates.

What was once a narrative filled with future contributors like Syndeo, Boosters, Keravive, and Glow&Go, the story seems to have shifted with fewer driving forces moving forward.

It’s worth noting that despite past successful estimates, the company’s stock has been cut by more than half. The analyst said the increasing booster attachment rate has likely aided consumable revenue, creating an illusion that underlying consumable unit growth is faster than it might be.

Block noted that if the growth of booster attachment rate starts to slow, it could put pressure on HydraFacial consumable unit growth to reach estimates, especially in a weakening consumer environment.

While the company has been making strides to adapt to the changing landscape, notably through the acquisition of SkinStylus and an attempted push into the at-home device market with Glow & Go, Block noted its efforts have not turned to profits yet.

Block also voiced concerns about the potential slow-down of Beauty Health’s long-term story.

Previous optimistic forecasts for contributions from Keravive and Glow & Go now seem unlikely to play a significant role in the near-term, which could leave the company in a vulnerable position.

SKIN Price Action: Shares of Beauty Health are trading 12.64% lower to $7.60 at last check, according to Benzinga Pro.

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