How to Buy European Wax Center (NASDAQ: EWCZ) Stock

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Contributor, Benzinga
March 17, 2022
$15.81
0.16[1.02%]
Last update: 4:00PM (Delayed 15-Minutes)
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Open15.560Close15.810
Vol / Avg.296.359K / 623.609KMkt Cap792.639M
Day Range15.290 - 15.83052 Wk Range11.970 - 20.700

Arguably when most investors seek out viable opportunities on the stock market, hair removal doesn’t exactly jump to mind. Nevertheless, the practice represents a vital component of holistic body and skin care. Primarily, hair removal facilitates hygiene, particularly for sensitive areas. As well, Dr. Heather L. Brannon explained that the “desire to remove unwanted hair usually starts during adolescence and never stops.”

In that sense, waxing service provider European Wax Center enjoys an incredibly large addressable market. While the COVID-19 pandemic is a distraction, the universal desire to look attractive as possible may drive this stock offering.

When is the European Wax Center IPO Date?

European Wax Center IPO’d on August 5, 2021, pricing its stock at $17 per share.

European Wax Center Financial History

In western societies and increasingly in several international markets, consumers recognize hair as belonging to 1 of 2 categories: wanted or unwanted. Over the last few years, the latter category has taken on more prominence. For instance, a 2016 article posted on Inc.com revealed that the multi-billion-dollar hair removal industry was about to expand its market size. Primarily, anti-hair trends eagerly married hair-removal innovations, prompting increased demand for professional body and skincare services.

As a 2018 report from Transparency Market Research pointed out, “More and more consumers prefer to visit beauty salons or spas for waxing as they are less messy and provide specific procedures of waxing.” And while spending from women traditionally dominated the hair-removal market, more men expressed interest in holistic personal grooming. Therefore, prior to the COVID-19 pandemic, the waxing industry adjusted to accommodate this new revenue stream.

Before you deep dive into European Wax Center’s financials, you should keep this wider context in mind. Certainly, the company’s revenue haul last year of $103.4 million is disappointing considering that in 2019, it rang up $154.2 million. As well, in both years, European Wax posted net losses, with an average loss of $22.95 million.

Moreover, the executive leadership team itself revealed in its IPO prospectus that the hair-removal industry’s “demand trend yields higher results in the second and fourth quarter of our fiscal year.” In short, the waxing service business is seasonal, imposing feast-or-famine dynamics in the revenue stream.

Though valid concerns, it’s also fair to stress that the social paradigm for these services has changed dramatically. Hair removal is no longer just a market for privileged housewives, which bodes well for EWCZ stock.

Earlier in the process, European Wax Center agreed to sell 10.6 million shares of its Class A common stock, per the company’s prospectus filed with the Securities and Exchange Commission. Management marketed its equity unit to price between $15 and $18 per share. On Wednesday, Aug. 4, Bloomberg reported that the hair removal salon ultimately raised $180 million in the offering.

Morgan Stanley (NYSE: MS), Bank of America (NYSE: BAC) and Jefferies Financial Group (NYSE: JEF) are frontrunning the IPO.

With its debut, European Wax Center finds itself in an unusual circumstance. As a waxing service provider, the company will almost certainly attract eyeballs for its distinct business profile. At the same time, it made its entrance during a decently crowded IPO day, with at least 9 other companies introducing equity shares for public ownership through major global exchanges.

Ironically, Bloomberg pointed out that the listing for EWCZ stock comes as “U.S. capital markets begin to slow as bankers and investors take time off during August after more than a year of robust IPO activity. More than 700 companies, including special purpose acquisition vehicles, went public in 2021, raising more than $230 billion, the busiest year on record.”

In other words, investors should be aware that while EWCZ offers a fresh take in an otherwise technology-and software-heavy IPO scene, management tapped the capital market during a lull.

European Wax Center Potential

As hair-removal services benefit from engagement beyond its core traditional demographic, the upside potential for European Wax Center stock comes down to simple math. According to ResearchandMarkets.com, the global hair removal and wax services market reached an estimated $9.8 billion last year. Industry experts project that as the international community recovers from the pandemic, the hair removal sector will command a valuation of $16.9 billion by 2027.

If so, such a valuation spike would represent a compound annual growth rate of 8.1% between 2020 and 2027. Additionally, the U.S. hair removal market alone was worth an estimated $2.6 billion last year, translating to nearly 27% of global share. That’s going to be music to speculators’ ears as European Wax Center stated on its IPO prospectus that it’s the “largest and fastest-growing franchisor and operator” of out-of-home waxing services in this country.

To be sure, not everything about the hair-removal industry is encouraging. While pent-up consumer demand supports a bullish thesis, the rise of COVID-19 infections is worrisome. More lockdowns could mean another revenue hit, a headwind that prospective investors may shy away from considering the existence of other viable IPOs.

At the same time, the pandemic will likely not be a permanent recurring threat. Even if COVID-19 rears its ugly head again, independent beauty shops will fall first, which cynically favors a leading franchise like European Wax Center.

Finally, the eagerness with which your average American flocked to ball games and nightclubs confirms that this consumer market is surprisingly resilient. Therefore, EWCZ stock might not be as speculative as its 2020 financial performance implies.

How to Buy European Wax Center (EWCZ) Stock

The process is straightforward if you know how to buy stocks. If not, below is a refresher.

Step 1: Pick a brokerage.

Because innovation and competition have forced brokerages to offer similar incentives like commission-free trading, you should focus on investing access in your search for best brokers.

Step 2: Decide how many shares you want.

Whether you buy IPOs or blue-chip stocks, money management is pivotal. The best way to control your risk-reward profile is via a balanced share count. Choose a number that gives you adequate reward potential but won’t devastate your portfolio if circumstances go awry.

Step 3: Choose your order type.

Before placing your order, review these market concepts.

  • Bid: The highest price a buyer will offer, the bid is always lower than the ask.
  • Ask: The lowest price a seller will take, the ask is always higher than the bid.
  • Spread: The difference between the bid-ask price, the spread also presents clues about market liquidity and risk. Tighter spreads stem from strong negotiations between bulls and bears, thus implying higher liquidity and lower risk. Broader spreads have the opposite implication.
  • Limit order: Limit orders are transaction requests at specific prices. This order type gives you maximum pricing transparency but no execution guarantees.
  • Market order: Conversely, market orders guarantee fulfillment but at the prevailing rate, which may fluctuate during your order processing period.
  • Stop-loss order: A risk-mitigation mechanism, a stop-loss order automatically exits your position at either a predetermined price or anything lower than it.
  • Stop-limit order: To remove ambiguities associated with your exit pricing (especially during extremely volatile market sessions), stop-limit orders only execute at a predetermined rate. Beware that such orders carry the same non-fulfillment risk as limit orders.

Step 4: Execute your trade. 

To execute a market order, follow these steps:

  1. Select your action type (buy or sell).
  2. Enter the shares you want to acquire (or sell).
  3. Hit the Buy (or Sell) button.

Apply the same sequence for limit orders but remember to include your desired execution price.

Wax on Some Profits for Your Portfolio

In prior generations, women overwhelmingly represented the dominant consumer class for the hair-removal industry. While that’s still the case, men are increasingly becoming wax service customers as well, implying a positive social shift which European Wax Center can use to its advantage. Despite seasonality and pandemic risks to its stock, the human need to look desirable may offer a net-positive environment for EWCZ stock.