OLPX Surges 25% On Earnings, Then Pulls Back 14%—Could This Be Your Buying Window?

Olaplex (OLPX) released quarterly results on August 6 that were good enough to propel its shares up by as much as 25% to a seven-month high of $2.32. The impressive performance in its specialty retail channel, which saw a 22.4% increase in sales, drove Q2 net sales to $103.9 million, slightly surpassing expectations. Adjusted earnings met the Street’s forecast at 3 cents per share. Additionally, the solid operating performance enabled OLPX to generate $15 million in free cash flow, reducing its net debt by approximately $2 million to $145.2 million.

Crucially, OLPX’s aggregated sell-through trend at key accounts in Q2 remained consistent with the seasonally adjusted trend observed at the end of 2023 and the beginning of this year, signaling a stabilization in demand for its products. Indeed, following significant declines in net sales and adjusted earnings of 40% and 66% during the first nine months of 2023, the rate of attrition slowed to 15% and 57% in Q4, 13% and 34% in Q1, and 5% and 12% in Q2. And with the midpoint of its reaffirmed outlook for 2024 net sales and adjusted net income of $435-463 million and $87-100 million indicating a return to top-line growth of 5% and much more modest earnings decline of just 3% in the second half of the year, things are clearly continuing to trend in the right direction.

Moreover, market research firm Circana (formerly the NPD Group) once again reported that OLPX held four of the five bestselling prestige hair-care products in the U.S. during Q2. Combined with the benefits from OLPX’s ongoing cost-saving initiatives, these factors suggest a potential return to bottom-line growth in the near future. Given this improving outlook, I think the stock’s 14% pullback from its post-earnings high presents a compelling buying opportunity.

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