Olaplex (NASDAQ: OPLX) has catapulted itself into the crosshairs of many investors looking for potential growth companies to bring about solid future returns. Possessing a number of innovative products, a highly-engaged fanbase, and relatively solid financials; Olaplex certainly seems like it could offer some value to shareholders.
Let's take a closer look at exactly how the company has fared since its blockbuster IPO last year.
Since launching in 2014, Olaplex has developed a highly evangelical following in the beauty world for its line of hair care products. The company bucked the trend of most companies by focusing on developing products that actually repair the hair follicles bond. Most other firms aim to simply improve the outer appearance of the hair, but Olaplex decided to examine the 'root' of the problem.
Its massive popularity amongst professional stylists and beauty gurus has seen Olaplex feature extensively across multiple social media platforms. The brand is consistently trending on TikTok as it continues to generate overwhelmingly positive word-of-mouth reviews.
With a robust product-launch strategy delivering roughly three new products to the market annually, the company is primed to penetrate even further into the highly competitive beauty industry over the next number of years.
Olaplex went public on September 30, 2021. It's listed on the NASDAQ exchange under the ticker symbol 'OLPX.' It sold its shares at a price of $21 as part of its IPO. The initial offering raised close to $1.6 billion in capital for the company following the sale of 73.7 million shares.
The company's science-backed solutions and strong sense of community and brand loyalty have seen it increase net sales by 81% to $161 million year-over-year (YoY) as of its November earnings report. The company is expecting revenue for the year to range between $580 million and $588 million. With the firm anticipated to announce its Q4 and full-year earnings call for February, investors will be keen to see if the company has managed to hit targets while facing comprehensive supply chain issues.
Despite the aforementioned sales numbers, Olaplex's share price is down almost 17% since debuting on the public market. While some of that is certainly related to a wider market pullback on growth stocks, the stock is still suffering from much of the bearish sentiments associated with the majority of 2021's IPOs.
Olaplex has numerous positive factors that will appeal to investors. Retail deals with established businesses such as Sephora and Ulta will bolster revenue, while the company's brand keeps growing from strength to strength.
Competition is one of the biggest factors that could upend Olaplex's potential growth. The beauty industry is notoriously competitive and companies like L'Oreal will almost certainly look to develop similar products in an attempt to capitalize on the clear desire for restorative hair care.
Olaplex has expressed intent to enter the skincare market with 82% of customers surveyed viewing the move "positively" in a survey circulated by the company last year. The skincare market is reportedly worth $140 billion a year globally, almost double the size of the hair care industry. Gaining a foothold there would give an instant boost to Olaplex's future outlook.
Overall, it's perhaps too early to judge whether or not Olaplex will deliver on its extremely high promise. In its last earnings call, CEO JuE Wong was clear to express how the company needs to "manage expectations and look to long term growth to add value for our shareholders." Until it's clear exactly how the company can add this value, it might be wise to monitor without buying for now.
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