Rising Self-Care Demand Will Transform Premium Beauty Markets

Key Takeaways

• Accelerated product launches, digital-first marketing, and strategic professional partnerships are set to drive step-change growth and expand Olaplex's global market footprint.
  
• Its premium positioning, innovative channel strategies, and focus on emerging markets should enhance brand resilience, fuel direct-to-consumer revenue, and diversify earnings internationally.
  
• Channel weakness, lackluster sales growth, margin pressures, shifting consumer preferences, and headwinds in the salon segment threaten Olaplex's profitability and long-term market relevance.

Catalysts

Through its subsidiaries, develops, manufactures, and sells haircare products in the United States and internationally.

• While analyst consensus expects innovation and new launches to drive growth modestly, the rapid acceleration in Olaplex's product pipeline-with plans for 2 to 3 major launches annually and an underpenetrated SKU lineup-could yield a step-change in revenue growth and category expansion, especially given early proof points like the Number 5 FINE conditioner heading the prestige beauty sales charts.
  
• Analysts broadly agree that a renewed focus on professional channels will support incremental revenue, but the comprehensive reinvention underway-including ticketed salon blitzes, elevated education, and new global partnerships-positions Olaplex to aggressively capture wallet share as the global stylist market rebounds, driving outsized gains in both sales and share of professional segment profits.
  
• The surging global emphasis on self-care and premium beauty, coupled with Olaplex's elevated scientific positioning and proven ability to command high average selling prices, sets the brand to disproportionately benefit as consumer willingness to spend on personal care accelerates in both mature and emerging economies, supporting sustained top-line growth and margin resilience.
  
• Olaplex's transformation into a digital-first content and commerce engine, evidenced by 140%+ growth in social impressions and strategic use of influencers, gives it a lasting customer acquisition advantage as beauty purchasing continues to shift toward digitally native, high-velocity brands, driving superior direct-to-consumer revenue growth and enhanced customer lifetime value.
  
• With robust moves to realign its business model for global scale-including AI-driven demand planning, a new London hub, and tiered international distributor strategy-Olaplex is well positioned to rapidly penetrate fast-growing emerging markets where premium hair care adoption is just beginning, creating a long runway for international revenue inflection and greater geographic diversification of earnings.

Olaplex Holdings Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more optimistic perspective on Olaplex Holdings compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts.
• The bullish analysts are assuming Olaplex Holdings's revenue will grow by 2.1% annually over the next 3 years.
• The bullish analysts assume that profit margins will increase from -0.3% today to 3.3% in 3 years time.
• The bullish analysts expect earnings to reach $14.9 million (and earnings per share of $0.03) by about August 2028, up from $-1.3 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 213.3x on those 2028 earnings, up from -714.0x today. This future PE is greater than the current PE for the US Personal Products industry at 19.8x.
• Analysts expect the number of shares outstanding to grow by 0.63% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 8.53%, as per the Simply Wall St company report.

Olaplex Holdings Future Earnings Per Share Growth

Risks

• Olaplex is experiencing persistent declines and volatility in key wholesale channels, with specialty retail net sales down double digits year-over-year and only modest sequential improvements, reflecting channel weakness and increasing risk of commoditization and competition, which can pressure future revenue growth and market share.
  
• Even as the company touts strong direct-to-consumer performance, overall year-to-date sales are flat following a thirty-five percent sales decline in 2023 and an eight percent decline in 2024, indicating demand recovery is slow and growth may be structurally challenged, which could limit sustained earnings improvement.
  
• The company's heavy investment in sales and marketing, including a near $15 million increase year-to-date, has contributed to significant margin compression, with adjusted EBITDA margins dropping from thirty-three percent to under twenty-five percent year-to-date, raising concerns over long-term profitability if revenue growth does not accelerate meaningfully.
  
• Long-term secular shifts such as consumer preference for clean, natural, and sustainable formulations pose ongoing risks to Olaplex's science-based, patented chemical approach, making it harder to sustain pricing power and relevance, which could erode both revenue and gross margins over time.
  
• The salon channel faces structural headwinds from reduced consumer foot traffic and evolving hair trends toward lower-maintenance styling, which management acknowledges as putting pressure on the frequency and volume of professional sales-a critical risk given Olaplex's reliance on this channel for earnings stability.

Valuation

• The assumed bullish price target for Olaplex Holdings is $3.66, which represents two standard deviations above the consensus price target of $1.99. This valuation is based on what can be assumed as the expectations of Olaplex Holdings's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $4.0, and the most bearish reporting a price target of just $1.5.
• In order for you to agree with the bullish analysts, you'd need to believe that by 2028, revenues will be $450.0 million, earnings will come to $14.9 million, and it would be trading on a PE ratio of 213.3x, assuming you use a discount rate of 8.5%.
• Given the current share price of $1.37, the bullish analyst price target of $3.66 is 62.6% 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.