The demand for beauty and personal care products is growing because they have become an integral part of everyday personal grooming. Also, increasing investments in research and development for new and desired products should bode well for the industry’s growth.
Despite multi-decade high inflation, increasing disposable income and a rise in the employment rate of women are the key factors that should help the industry generate substantial growth. The global beauty and personal care products market is expected to expand at a 7.7% CAGR from 2022 - 2030. Also, the extensive availability of beauty and cosmetic products through online and retail sales channels has been helping the industry generate substantial sales.
Given this backdrop, Wall Street Analysts anticipate fundamentally sound beauty stocks Coty Inc. (COTY), Olaplex Holdings, Inc. (OLPX), and The Beauty Health Company (SKIN) to witness significant upside in the coming months.
Coty Inc. (COTY)
COTY in New York City and its subsidiaries manufacture, market, distribute, and sell beauty products worldwide. The company offers prestige fragrances, skincare, and color cosmetics products through renowned retailers, including perfumeries, department stores, e-retailers, direct-to-consumer websites, and duty-free shops under brands like Alexander McQueen, Burberry, Calvin Klein, Gucci, and other reputed brands.
In February, COTY announced that Sally Hansen revealed an advanced virtual try-on tool–the first to market Perfect Corp.'s AgileHand Technology application–allowing consumers to easily experience hundreds of Sally Hansen nail color options in an expanded reality environment. Perfect Corp. is a well-known beauty and fashion tech solutions provider.
COTY's net revenue increased 11.5% year-over-year to $1.58 billion in the second quarter, ended Dec. 31, 2021. Its non-GAAP operating income grew 16.4% from its year-ago value to $236.30 million, while its non-GAAP net income improved 44.4% year-over-year to $147.7 million. The company non-GAAP EPS amounted to $0.17.
Analysts expect COTY's revenue to increase 12% year-over-year to $1.15 billion in the third quarter, ended March 31, 2022.
Among the nine Wall Street Analysts that rated the stock, six rated it Buy, and three rated it Hold. The 12-month median price target of $13.56 indicates a 68% potential upside. The price targets range from a low of $10.00 to a high of $20.00. The stock closed the last trading session at $8.07.
Olaplex Holdings, Inc. (OLPX)
OLPX manufactures and sells hair care products. The Santa Barbara, Calif., company provides hair care shampoos and conditioners for the treatment, maintenance, and protection of hair. It offers hair care products to professional hair salons, retailers, and everyday consumers.
Last month, ShoppingGives, an e-commerce platform that makes purposeful and profitable relationships between brands and nonprofits, announced its partnership with OLPX. OLPX launched ShoppingGives' donation integrations in its online store, beginning with an emphasis on nonprofits empowering women in honor of Women's History Month. Through this partnership, OLPX can directly involve its customers in this philanthropic campaign and future ones, with the flexibility to feature any of 1.8 million nonprofits as recipients of a portion of its sales proceeds.
During the fourth quarter, ending Dec. 31, 2021, OLPX's net sales increased 78.7% year-over-year to $166.50 million. Its adjusted net income increased 55.2% from its year-ago value to $71.39 million, while its adjusted EBITDA improved 68.2% from its prior-year quarter to $110.68 million. The company's adjusted EPS grew 42.9% year-over-year to $0.10.
The $0.15 consensus EPS estimate represents a 37.1% improvement year-over-year for the third quarter ending Sept. 30, 2022. Analysts expect OLPX's revenue to increase 37% year-over-year for the same period.
All seven Wall Street Analysts that rated the stock rated it Buy. Closing its last trading session at $14.09, the 12-month median price target of $27.29 represents a 93.7% potential upside. The price target ranges from a low of $17.00 to a high of $40.00.
The Beauty Health Company (SKIN)
SKIN in Long Beach, Calif., designs, develops, manufactures, markets, and sells aesthetic technologies and products internationally. The company's flagship product includes HydraFacial, which improves the skin to cleanse, peel, exfoliate, extract, infuse, and hydrate the skin with proprietary solutions and serums.
In March, SKIN announced the introduction of HydraFacial Syndeo, a revolutionary new digitally connected device co-created with their HydraFacialist community to improve the consumer experience. "Syndeo positions us to lead in the beauty health market by applying technology and data to maximize our customer experience," said Andrew Stanleick, President and CEO of Beauty Health.
For the fourth quarter, ending Dec.31, 2021, SKIN's net sales increased 105.6% year-over-year to $77.89 million. Its adjusted gross profit grew 132.1% from its year-ago value to $59.60 million. Its adjusted net income amounted to $1.61 million, versus a $1.98 million loss in the prior-year quarter. The company's adjusted EBITDA improved 138.4% year-over-year to $8.49 million.
Analysts expect SKIN's revenue to increase 43.3% year-over-year to $68.11 million for the first quarter, ending March 31, 2022. The consensus EPS estimate of $0.03 represents a 52.2% year-over-year improvement for the third quarter, ending Sep.30, 2022. The stock has gained 31% in price over the past year.
All five Wall Street Analysts that rated SKIN rated it Buy. The 12-month median price target of $27.20 indicates a 108.4% potential upside. The price targets range from a low of $23.00 to a high of $35.00. The stock closed the last trading session at $13.05.
COTY shares were trading at $8.11 per share on Monday morning, up $0.04 (+0.50%). Year-to-date, COTY has declined -22.76%, versus a -10.46% rise in the benchmark S&P 500 index during the same period.
About the Author: Spandan Khandelwal
Spandan's is a financial journalist and investment analyst focused on the stock market. With her ability to interpret financial data, she aims to help investors evaluate the fundamentals of a company before investing.
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