Lockdowns and restrictions are being felt across multiple industries during the COVID-19 pandemic, impacting both businesses and consumers. The worst among the victims are the salons, stylists and retailers that support personal beauty care. Salon closures meant no appointments, and no appointments meant consumers had to do things for themselves that they would have happily paid for professionals in the past. .
Olaplex (OLPX -0.19%) A leader in professional hair care products, it boasts a patented system that rebuilds hair. is looking to expand its consumer product portfolio. For investors, it could be an opportunity to enter a company with huge growth potential.
September IPO Boosts Company’s Valuations
When Olaplex announced its IPO in early September, the initial stock price was expected to be between $14 and $16 per share. By the time the IPO took place on his Sept. 30, the company was valued at over $15 billion, supported by a share price that started at $21. This is a 50% jump above the lower end of the first range and an additional 17% increase over the first day of trading. This brought in $1.6 billion to investors.
Olaplex’s president, CEO and director is JuE Wong, who is using the IPO to draw attention to the company and expand the brand to consumers who are serious about hair care. The company will primarily focus on shampoos and conditioners. According to Allied Market Research in 2017, the market for hair care products was valued at his $18 billion and is projected to reach $26 billion by 2026 with a compound annual growth rate of 4.6%. New products through 2024 are poised to profit in growing markets.
Current distribution channels include professional salons and direct-to-consumer sales, including Sephora, Blue Mercury, Space NK, and nordstromBut Wong said the company needs to increase its penetration to gain more market share. Currently, the penetration rate at Sephora is only 7%.
Competitors bring more than just products
The surge in the share price immediately following the IPO, coupled with forecasts of positive growth in the hair care market, looks promising, but the company faces some challenges as it seeks to expand its brand.
First, the stock is trading at a high price/earnings ratio (P/E) of 158x. loreal When ultra beauty They trade at PERs of 54 and 28, respectively, and have earnings per share of $1.69 and $13 over the last 12 months. Olaplex earnings are $0.16 per share. Second, salon and retail store shelves are full of competing products. And third, the company is in the middle of a patent infringement lawsuit appeal.
In March of this year, a U.S. appeals court ruled in L’Oréal’s favor, revoking an earlier judgment and a $66 million judgment that L’Oreal infringed an Olaplex patent for a less damaging method of bleaching hair. overturned. The lawsuit alleges misappropriation of trade secrets, violations of non-disclosure agreements, and patent infringement against L’Oréal as a result of merger and acquisition discussions between the two companies. In May, Olaplex announced it would appeal the new ruling and believes L’Oreal will succeed in proving that he willfully infringed Olaplex.
get on the momentum
Infringement appeals are of interest to companies and investors, but it should be noted that this is not the first time the two competitors have faced each other in court. Dating back to 2016, Olaplex has consistently accused L’Oreal of infringing its patented system. It advertises itself as the only true bonding system for damaged and dyed hair that comes with bleaching and coloring.
All the while, Olaplex has continued to grow its brand and generate revenue growth. Sales in the first half of 2021 were significantly higher than in the same period last year. As of June 2021, the company made a profit of his $95 million against his $270 million in earnings, which compared to the same period in 2020, compared to his earnings. It represents an increase of 170%. Earnings in the first half of 2021.
The company appears to be on the right track for continued growth in the robust hair health care market. It could give the company’s stock the boost it needs to beat the dollar. A strong boost could help Olaplex reach his lofty goal of $50. That would be 72% above his current $29 stock price.