On Friday, Goldman Sachs (NYSE:GS) began coverage on shares of Oddity Tech Ltd (NASDAQ:ODD), assigning a Neutral rating and setting a 12-month price target of $48.00. The investment firm's analyst cited Oddity Tech's position as a disruptor in the prestige beauty industry and its potential for strong double-digit growth. According to InvestingPro data, the company has already demonstrated this potential with impressive revenue growth of nearly 30% in the last twelve months.
The analyst noted that Oddity Tech is leveraging its unique technology platform and robust consumer database to propel growth. This strategy is not only enhancing its existing powerhouse brands but also aiding in the company's expansion into new product categories and adjacent markets. The company's success is reflected in its outstanding gross profit margin of 72% and strong return on assets of 23%.
Goldman Sachs' coverage initiation reflects their expectation that Oddity Tech will continue to harness its technological edge to maintain a competitive stance in the market. The $48 price target is indicative of the firm's forecasted value for the stock over the coming year. InvestingPro's Fair Value analysis suggests the stock is currently fairly valued, with analyst targets ranging from $42 to $66.
The Neutral rating from Goldman Sachs suggests that the investment bank believes Oddity Tech's stock is fairly valued at its current price, factoring in the company's growth prospects and market position. This rating implies that the firm does not see an immediate upside or downside to the current stock price.
Investors and market watchers will likely monitor Oddity Tech's performance closely to see if the company can fulfill the growth expectations outlined by Goldman Sachs. The Neutral rating may also influence investor sentiment as they weigh the potential risks and rewards of investing in Oddity Tech shares.
In other recent news, beauty industry leader ODDITY reported a remarkable 27% revenue increase year-to-date during its Third Quarter 2024 Earnings Conference Call, reaching $523 million. This robust growth was driven by the company's brands IL MAKIAGE and SpoiledChild, and a resilient direct-to-consumer model. The average order value also saw a 9% increase year-over-year, bolstered by a higher frequency of orders.
Furthermore, the company's gross margin reached 69.9%, slightly above expectations, and is forecasted to normalize around 68% in Q4. ODDITY also raised its full-year 2024 revenue guidance to $642-$644 million, with a projected adjusted EBITDA between $147 million and $149 million.
In terms of future developments, ODDITY is set to launch two new brands in 2025 and is investing in technology and product innovation through ODDITY LABS. The company has also seen successful international expansion in Canada, the U.K., Germany, and Australia, and is optimistic of these markets potentially comprising over 50% of the business. However, there are no immediate plans for further international expansion or entry into the GLP drug market.
ODDITY is in a strong financial position, with $248 million in cash and no debt, and has repurchased about $50 million of its stock this year. It has a user base exceeding 50 million and is targeting a $600 billion global market. Lastly, the company is leveraging advancements in generative AI for personalized models, particularly for Brand 3 treatments, and focusing on higher-priced skin products to facilitate upsells and bundles.
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