The shocking financials and forecast of hair care products maker prompted multiple Wall Street analysts to downgrade Olaplex ( NASDAQ: OLPX ) on Wednesday.
Late Tuesday the company owned by a private equity firm Advent International, Olaplex, disclosed negative pre-announcement with a large reduction in sales and profits guidance on blame to weaker macros and increasing competition.
Raymond James called Olaplex ( OLPX ) "too tangled" while downgrading the stock to Market Perform from Strong Buy.
"The challenging backdrop is driving some consumers to lengthen the time in between hair treatments, making it more challenging for Olaplex to acquire new customers, on top of inventory rebalancing by retailer," the analyst wrote in a research note issued on Wednesday, however, maintaining optimism for the haircare as one of the fastest growing categories in Beauty.
The sell-off pressure on the stock has just got worse after Olaplex added its chief operating officer Tiffany Walden, who has been with the company since 2016, one of the most tenured employees, resigned effective immediately Oct. 18 .
"Macro risk factors have clearly been building externally, but the magnitude of OLPX's revision is surprising in terms of the sharp magnitude and quickness of macro pressure, which is more in-line with what we have seen from discretionary companies recently than staples companies. This signals OLPX is more macro sensitive than we thought," Dara Mohsenian, analyst at Morgan Stanley, said talking about the lack of forward visibility at Olaplex ( OLPX ).
Morgan Stanley, thus, cut the rating on Olaplex to Equal Weight from Overweight. The firm's price target is sliced to $6.50 from $13 at base case drawn on ~14.5x CY23 EV/EBITDA multiple while the bear case shows the likes of stock price at $3.
To what is to be called the highest one-day drop since its listing in Sept. 2021, Olaplex ( OLPX ) stock is down 45% in pre-market on Wednesday to trade at $5.37. That is well below the company's 52-week low of $8.72 until last close.
The price correction on Wall Street follows. Piper Sandler lowered target to $8 from $12 on OLPX shares. Bank of America has downgraded the stock to Underperform from Buy. JPMorgan Chase & Co. slashes it from Overweight to Underweight.
But what remains unchanged is Seeking Alpha's Quant rating of "Sell" on Olaplex ( OLPX ). On Oct. 12, SA Quant system flagged a warning that OLPX is at high risk of performing badly due to its decelerating momentum and is overpriced when compared to other Consumer Staples stocks.
If you are looking for alternatives to Olaplex Holdings, Inc. (NASDAQ: OLPX ) see Seeking Alpha's top rated Consumer Staples sector stocks by quant rating .
For further details see:
Olaplex' crash hits Wall Street downgrades over macro sensitive financials and COO exit