Brand 3 Launch And International Expansion Will Unlock Opportunities

Key Takeaways

• Strategic international expansion and tech-driven customization efforts are set to bolster revenue and enhance customer experience.
  
• Launch of Brand 3 and innovation in science-backed products could drive high-margin sales and future earnings growth.
  
• Ambitious investments and international expansion risks could strain resources, impacting net margins, while R&D expenses might not immediately boost short-term earnings amidst geopolitical pressures.

Catalysts

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

• Oddity Tech is heavily investing in technology, particularly in data-driven user customization and science-backed product development, which is expected to enhance product offerings and improve customer experience. This focus on technology is likely to support future revenue growth and improve net margins through better customer retention and higher average order values.
  
• The company's strategic push towards international expansion represents a significant growth opportunity, as currently only 20% of business operations are outside the U.S., compared to 70% for competitors. Successful international scaling could substantially increase revenue.
  
• The forthcoming launch of Brand 3, a telehealth platform for medical-grade skin and body issues, is expected to open a significant new revenue stream. The extensive R&D and technology behind this platform suggest potential for high-margin sales, contributing to future earnings growth.
  
• ODDITY LABS is focused on long-term innovation by developing proprietary molecules and high-efficacy science-backed products for new brands. This could significantly boost future revenue and margins by introducing differentiated products that capture consumer interest and justify premium pricing.
  
• With a strong balance sheet and no debt, Oddity Tech is exploring acquisitions that could enhance capabilities in biotech and AI. Strategic acquisitions could accelerate growth, augment both revenue and net margins, and potentially improve earnings significantly.

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 13.9% in 3 years time.
• Analysts expect earnings to reach $156.3 million (and earnings per share of $2.34) by about April 2028, up from $101.5 million today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting $172.3 million in earnings, and the most bearish expecting $140.3 million.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 22.5x on those 2028 earnings, down from 25.9x today. This future PE is greater than the current PE for the US Personal Products industry at 21.3x.
• 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 8.9%, as per the Simply Wall St company report.

Oddity Tech Future Earnings Per Share Growth

Risks

• The ambitious investments in new brands and telehealth platforms may strain resources and could impact net margins and earnings if they don't achieve expected success, resulting in overextended operations.
  
• Increased international expansion introduces execution risk and could be more costly than anticipated, especially if international markets develop slower than expected, potentially affecting revenue and adjusted EBITDA margins.
  
• The impact of tariffs and trade policies, although currently deemed manageable, might increase and put pressure on gross margins, affecting profitability depending on geopolitical developments.
  
• With a focus on building telehealth infrastructure and proprietary molecules, significant R&D expenses may not yield immediate revenue generation, potentially impacting short-term earnings and cash flow.
  
• Heavy reliance on technology and online platforms poses a risk of operational disruptions or cybersecurity threats, which could affect sales channels and overall revenue if not properly managed.

Valuation

• The analysts have a consensus price target of $53.444 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 $42.0.
  
• 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 $156.3 million, and it would be trading on a PE ratio of 22.5x, assuming you use a discount rate of 8.9%.
  
• Given the current share price of $47.13, the analyst price target of $53.44 is 11.8% 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.