IBD Stock Analysis
- Breaking above trend line on weekly chart, clearing short term levels on daily.
Industry Group Ranking
* Not real-time data. All data shown was captured at 2:22PM EST on 12/30/2021.
Olaplex (OLPX) is a profitable new issue, delivering supercharged earnings and sales growth that make it relatively unique among IPOs.
The Santa Barbara, Calif.-based company pioneered bond-building, a type of hair treatment. Olaplex’s products claim to relink the damaged bonds that make up hair, remaking from the inside rather than merely adding shine.
The products have inspired a devout following, especially with Gen Z and young millennial consumers. The brand received a promotional boost in the influencer economy, with support spreading on TikTok and other social media apps that burnished Olaplex’s appeal.
On Nov. 29, Olaplex said it will launch its patented products at 1,250 stores and on ulta.com beginning January 2022. The move expanded an existing partnership. Beauty chain Sephora, owned by LVMH (LVMHF), and Nordstrom (JWN), already stocked Olaplex products.
On Dec. 29, analysts at Cowen named Olaplex stock among the top beauty stocks, citing “innovation, pricing and generation Z” factors. Of their picks, Olaplex is expected to see the biggest sales growth, with the global cosmetics industry seen hitting $415.29 billion by 2028.
Premium hair care is among the fastest growing segments within that expanding market. Products from Olaplex often sell for more than double the price of some competitors.
OLPX Stock Technical Analysis
But a weekly chart shows that, with Thursday’s move, Olaplex stock broke above a downward sloping trend line. That produced a buy point at 28.19, above the Dec. 10 high. The stock is also clearing some short-term resistance levels on a daily chart.
While early buy points are usually targets strictly for aggressive investors, Olaplex’s early entry may be the safer bet — rather than waiting on a standard buy point at 30.23 — still more than 6% above where shares traded on Thursday.
The relative strength line for OLPX stock is extremely choppy, according to MarketSmith chart analysis. The RS line is well below highs following its September initial public offering. But it has also come well off December lows, reflecting the action of a new IPO in a volatile stock market.
The Olaplex IPO raised $1.5 billion, pricing above the expected range at $21.
OLPX stock’s IBD Composite Rating, which combines key fundamental and technical metrics in a single easy-to-use score, is 82 out of 99, which is decent for an IPO stock.
The cosmetics/personal care group, to which Olaplex belongs, ranks a mediocre 69 from the top of the 197 industry groups tracked by IBD, according to IBD Stock Checkup. The group also includes L’Oreal (LRLCY), whose Redken brand offers hair bonding products. So does Henkel‘s (HENKY) Schwarzkopf brand.
Olaplex Stock: Earnings and Fundamentals
On Nov. 10, the new IPO stock issued its first earnings report as a publicly traded company. Olaplex beat both earnings and sales estimates for the September quarter. Year over year, OLPX earnings jumped 57% as revenue leapt 81%.
Sales grew 58% in the professional channel, 128% in specialty retail and 87% in direct-to-consumer, the company said.
Results reflected “the power of our disruptive business model focused on improving hair health with great products backed by science,” CEO JuE Wong said in a statement.
In all of 2021, analysts project Olaplex earnings of 39 cents per share, according to FactSet. Olaplex earnings growth is estimated at 23% in 2022. Sales are likely to reach $584 million in 2021, more than double 2020’s $282 million. Sales growth is seen slowing to a still-strong 30% in 2022.
Olaplex has signaled an interest in entering other beauty categories, such as skin care.
Find Aparna Narayanan on Twitter at @IBD_Aparna.
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