OLPX Stock: What You Need to Know Before Investing in Olaplex
Olaplex Holdings (Nasdaq: OLPX) is not your average hair care brand. Starting out of a garage in sunny California, the brand is now a consumer favorite with millions of fans. But after a highly anticipated IPO, OLPX stock is giving back its returns with tech stocks falling.
After receiving a patent for its bond-building tech in 2015, the brand was off to the races. That said, the company is on a mission to improve hair health with its patented formula for damaged hair.
More importantly, Olaplex builds a strong community with followers as it expands its reach. The potential +$100B global hair care market is ready for a takeover, and Olaplex is making a case.
Despite solid growth, OLPX stock is one of the worst-performing IPOs of 2021. That said, Olaplex is still an early-stage disruptor with a high ceiling.
Here’s what you need to know about the No. 1 hair care brand on Amazon and Sephora.
Technology In Hair Products?
Yes, Olaplex uses the latest tech to improve hair by protecting, strengthening and repairing. And no, it doesn’t use tiny robots or some crazy futuristic device.
Instead, it uses a patented active ingredient called Bis-Aminopropyl Diglycol Dimaleate. I know, this sounds intense. But the formula is non-toxic as the company looks to limit its impact on the Earth.
The amount ingredient varies in Olaplex’s three main products:
- One Bond Multiplier: Olaplex’s most well-known product starts the rebuilding process.
- Two Bond Perfector: With smaller amounts of the ingredient, it continues to rebuild and restore.
- Three Hair Perfector: An at-home treatment with even smaller portions.
So far, the products seem to be working, with 76% of stylists believing the product to be superior. Not only that, but the company also offers a hair diagnostics quiz to ensure users get the right products.
Olaplex’s Loyal Following
OLPX stock is carving a niche as users continue falling in love with it. With this in mind, here are a few facts to show you how popular the brand is.
- +2.2M followers on Instagram, making it the No. 1 follower count compared to the competition.
- +350M viewers on TikTok with the hashtag OLAPLEX.
- +1M hair diagnostic quizzes taken since October 2010.
- +230K stylists engage in the Olaplex social media community.
- +13K daily story views on Instagram.
In other words, Olaplex is attracting consumers with a superior product. Then, they ask them to join their engaging community, promoting further reach for the brand.
By doing so, the brand is expanding, now offered in over 100 countries. Even celebrities are joining in with Kim Kardashian and Drew Barrymore using the products.
Explosive Growth Across The Board
Olaplex’s hard work connecting with users is working as its first earnings as a public company shows strong growth. In the third quarter, Olaplex’s net sales increased over 80%, reaching $161.6M. The growth shows the company’s expanding market potential.
But the most important takeaway here is profitability. Despite OLPX stock nearly doubling its sales, its cost of revenue only grew 28%, going from $26.6M to $34.1M.
Premium beauty companies are known for high margins. That being said, Olaplex’s gross profit margin reached 79.9% despite the ongoing supply chain issues.
Altogether the company’s net income reached $56.59M, representing 99.9% growth from 2020. Even more, the brand is seeing higher sales across all channels.
- Professional grew 57.6%.
- Specialty Retail rose 128%.
- Direct to Consumer also increased 86.9%.
On the other hand, its debt situation is less than ideal with over $766 million on its balance sheet. Yet, with the company’s rapid growth right now, debt is less concerning. However, if growth slows, investors may second guess.
Why OLPX Stock Is Down
Despite the growth Olaplex is achieving, OLPX stock is down 35% from its all-time high (ATH) of $30.41 per share.
At the same time, several factors are working against OLPX shares right now. First, recent IPOs are performing horribly, with the Renaissance IPO ETF (IPO) slipping over 30% in the past three months.
Secondly, investors are dumping growth stocks in favor of dividends and more value.
And lastly, the overall market is down, with several indexes falling from ATHs. With this in mind, OLPX stock losing almost one-third of its value may be more market-driven than anything.
The drop doesn’t seem to be affecting Wall Street’s opinion of the company. OLPX stock has an average price target of $35.50, suggesting close to 80% upside.
OLPX Stock Forecast: Market Opportunities & Risks
Olaplex is rapidly growing its following while earning space at top retailers such as Sephora. Not only that, but the brand is also the #1 haircare brand on Amazon. As the company’s viral posts continue reaching new masses, the company’s sales builds momentum.
The global haircare market is expecting to reach over $112B by 2028. With a massive community of followers, Olaplex is positioning itself to continue growing.
After successfully disrupting the hair care market, Olaplex is turning its sights to skincare. This year, the company is planning several launches, with its No. 8 moisture mask pioneering the way.
However, a critical thing to consider is the threat of competition. Olaplex has already lost one case to competitor L’Oréal (OTC: LRLCY) for stealing its trade secrets. If the ruling holds up, it could open the gates for a cheaper alternative.
Even though Olaplex is planning to appeal to the decision, OLPX stock will lose some of its shine if it holds. As of right now, the company is operating in a niche market with a growing community of followers.
All things considered; the beauty firm has a huge opportunity that seems in its sights. But there is always the risk of competition in consumer products. Look for Olaplex to continue building relationships to solidify its market lead.