OLPX's Forecast Darkens: Analyst Adjusts Estimates Reflecting Struggles In Consumer And Professional Segments

Telsey Advisory Group analyst Dana Telsey downgraded Olaplex Holdings, Inc. OLPX from Outperform to Market Perform, lowering the price target to $4 from $6.

OLPX recently reported Q2 results, where net sales were $109.2 million, down 48.2% Y/Y.

The analyst notes that the disappointing Q2 results (coming in well below expectations) and reduced FY23 outlook reflect ongoing macro challenges weighing on both the consumer (price sensitivity) and the US professional segment.

With the disappointing results and slowing sell-in, as partners reduce weeks of supply on hand, OLPX has seen momentum slow. 

In addition, competitive promotional activity and negative online commentary (unfounded, in analyst's view) have likely further weighed on demand, adds the analyst.

OLPX's revised guidance now looks for investments in sales and marketing to support stabilization in trends in the back half of the year instead of growth.

Incorporating the disappointing 2Q23 results, the company's revised outlook for FY23, and expectations for a lower baseline trend of sales in the back half, the analyst reduced estimates for the full year.

For FY23, Telsey now looks for sales to decrease 35.4% Y/Y to $455 million (down 14.7% Y/Y to $601 million prior) vs. the prior consensus estimate of $571 million. 

The analyst projects FY23 adjusted EBITDA of $168 million, down from $300 million previously, vs. the prior consensus expectation of $270 million. 

In turn, the FY24 adjusted EBITDA estimate decreases to $190 million, down from the previous estimate of $339 million, which compares to the market's prior forecast of $305 million. 

Price Action: OLPX shares are trading lower by 12.5% to $2.83 on the last check Wednesday.

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