Global Expansion And AI Investments Will Drive Future Success

Key Takeaways

• New growth engines and AI technology enhance revenue growth, improve margins, and boost consumer engagement.
  
• International expansion in key markets and new brand launches drive substantial revenue growth and increase customer lifetime value.
  
• Reliance on consumer confidence and high expenses without immediate returns could pressure margins and delay financial gains amid macroeconomic uncertainties.

Catalysts

Operates as a consumer tech company that builds digital-first brands for the beauty and wellness industries in the United States and internationally.

• The company is developing new growth engines including Oddity's labs, new brands, and AI technology, which are expected to accelerate revenue growth and improve margins by driving product innovation and consumer engagement.
  
• Oddity's strength in repeat sales and high customer satisfaction with a repeat revenue rate of over 100% is likely to enhance long-term profitability through higher margins and increased lifetime customer value.
  
• The focus on international expansion, particularly accelerating growth in the UK, Germany, and Australia, is expected to drive substantial revenue growth as the company taps into new markets.
  
• The launch of new brands, such as Brand 3 with its unique telehealth platform, could significantly increase revenues and margins by entering high-demand product categories and leveraging technological and product differentiation.
  
• Continued investment in technology, AI, and biotech through Oddity Labs allows the company to remain competitive in product innovation and efficiency, likely improving gross margins and sustaining high revenue growth.

Oddity Tech Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Oddity Tech's revenue will grow by 20.3% annually over the next 3 years.
• Analysts assume that profit margins will shrink from 15.7% today to 14.3% in 3 years time.
• Analysts expect earnings to reach $161.2 million (and earnings per share of $2.41) by about April 2028, up from $101.5 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 22.4x on those 2028 earnings, up from 20.8x today. This future PE is greater than the current PE for the US Personal Products industry at 20.8x.
• Analysts expect the number of shares outstanding to decline by 2.74% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 8.86%, as per the Simply Wall St company report.

Oddity Tech Future Earnings Per Share Growth

Risks

• The expected incremental expenses to support the growth of Brand 3 and ODDITY LABS in 2025 could compress adjusted EBITDA margins, affecting overall profitability.
  
• The potential lower gross margin of Brand 3 due to higher cost of goods related to prescription products and doctor networks could pressure overall gross margin levels for Oddity.
  
• The reliance on consumer confidence and discretionary spending in the beauty sector may expose Oddity's revenue growth to macroeconomic uncertainties, which could impact their financial performance.
  
• Despite the initial investment in ODDITY LABS and Brand 3, there are no material revenue contributions expected in 2025, which could result in delayed returns on these significant investments.
  
• The increased media costs and advertising spend without proportional revenue growth could affect net margins, especially if media expenses rise faster than revenue growth, impacting earnings.

Valuation

• The analysts have a consensus price target of $54.778 for Oddity Tech based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $66.0, and the most bearish reporting a price target of just $46.0.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $1.1 billion, earnings will come to $161.2 million, and it would be trading on a PE ratio of 22.4x, assuming you use a discount rate of 8.9%.
• Given the current share price of $37.87, the analyst price target of $54.78 is 30.9% higher.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.