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On Tuesday, Piper Sandler adjusted its outlook on Olaplex Inc (NASDAQ:OLPX), reducing the price target to $1.50 from the previous $2.00 while maintaining a Neutral rating on the stock. According to InvestingPro data, the company currently trades at $1.67, with analysts’ targets ranging from $1.50 to $4.00. The firm noted that Olaplex is on track for top-line growth, with expectations of returning to positive figures later in 2025, despite a 9.15% revenue decline in the last twelve months. This progress follows significant investments by the company in expanding its team both in the U.S. and overseas, ramping up research and development efforts, and increasing its marketing expenditures in a more strategic manner.
The analyst at Piper Sandler indicated that these investments have led to a realignment of margins to more typical levels within the beauty industry. InvestingPro analysis shows the company maintains impressive gross profit margins of 71.81%, with additional insights available in the Pro Research Report, which provides comprehensive analysis of 1,400+ top stocks. The firm views the top-line growth and margin realignment as positive developments, aligning with the criteria they had been awaiting to feel more confident in setting future targets for Olaplex.
Despite the positive outlook on the company’s long-term potential, Piper Sandler expressed caution due to the early stage of these developments. The firm stated that the adjustments to their estimates were necessary due to the "reset" taking place within the company. As a result, the analysts see limited potential for significant near-term or intermediate-term share price appreciation, which supports their decision to retain the Neutral rating.
The report concluded with the sentiment that while the near-term share upside may be limited, there is growing optimism about Olaplex’s long-term potential if the company’s progress continues as planned. Based on InvestingPro Fair Value analysis, the stock appears undervalued at current levels, with strong free cash flow yield and healthy liquidity metrics supporting long-term potential. Piper Sandler’s revised price target of $1.50 reflects this cautiously optimistic stance on the future of Olaplex.
In other recent news, Olaplex Holdings Inc. reported its fourth-quarter 2024 earnings, with an earnings per share (EPS) of $0.01, meeting Wall Street expectations. The company’s revenue for the quarter was $100.7 million, surpassing the anticipated $87.51 million, indicating strong sales performance. Despite a year-over-year decline in net sales, Olaplex managed to exceed revenue expectations, showcasing resilience in a challenging market. The company also maintained a strong cash position, with cash and equivalents rising to $586 million from $466.4 million. Olaplex’s CEO, Amanda Baldwin, emphasized the company’s strategic focus on innovation and new product launches. The company plans to introduce 2-3 new products annually and strengthen its presence in the U.S. market. Looking ahead to 2025, Olaplex projects net sales to range from a 3% decline to a 2% increase, with adjusted gross margins between 70.5% and 71.5%.
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