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Olaplex Holdings (NASDAQ:OLPX) inventory reveals many encouraging indicators following its late September IPO. Investors could also be shy to provoke a place OLPX inventory given there isn’t any analyst protection of the fairness. But from my perspective, there are some early indicators indicating that this inventory has potential.
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The thought of a so-called “robust IPO” is basically a subjective evaluation. Oftentimes markets equate a sharp worth enhance at IPO with a robust IPO. But such equities can typically drop rapidly thereafter and show risky for the quarters that comply with.
So primarily, by that commonplace, a robust IPO is one in which early traders see fast worth appreciation, rapidly cashing out and making a good-looking return in the method.
I are likely to disagree with that definition of IPO success. In my opinion, the IPO that Olaplex has had is extra fortuitous for extra stakeholders.
In its quick life as a publicly traded entity, OLPX inventory has confirmed to be comparatively secure. It has traded in a vary between $23 and $26. It’s true: there aren’t many information factors from which to make such inferences. But then again, what we don’t see is a scenario in which privileged IPO traders money out and the inventory burns. That’s why I imagine the hair care merchandise producer and retailer advantages extra stakeholders than different “robust” IPOs.
And one other sign that signifies Olaplex’s energy occurred previous to the IPO itself.
Olaplex’s Upsized IPO Worked
When a firm going public upsizes its IPO, it indicators a few issues. First, the corporate believes that demand for its fairness has elevated—or no less than it’s making an attempt to sign to the market that it’s extra enticing than earlier IPO worth estimates. Second, it indicators higher threat to traders as increased costs mathematically equate to an elevated market capitalization. The threat is that you just purchase in at increased costs, the corporate will increase its IPO proceeds, after which it tanks post-IPO.
Here’s what’s good about Olaplex: It elevated its IPO pricing however hasn’t dipped beneath these costs after changing into publicly listed.
Win-Win for OLPX Stock
Here’s what occurred in response to the Wall Street Journal:
“Olaplex ended up boosting the scale of its deal, which bought above its anticipated vary, by 10%. The Santa Barbara, Calif., firm had initially deliberate to supply 67 million shares priced from $14 to $16 every. On Tuesday, Olaplex raised that vary to $17 to $19. The IPO collected $1.55 billion after promoting 73.7 million shares at $21 every, above an already sweetened vary.”
It was a win-win scenario. The firm boosted its IPO proceeds and traders who jumped in at $21 have a priceless asset with upside.
That’s a robust worth sign for OLPX inventory provided that it at the moment has no analyst protection. Potential traders don’t should look to Wall Street for indicators that shares gained’t tank as a result of the market’s pricing is indicating as a lot.
Strong Position in Burgeoning Niche
Olaplex produces hair care merchandise. Cosmetics in normal are famous for his or her excessive margins, and hair care merchandise are not any completely different. In reality, in 2020, Olaplex posted gross margins of 82% and EBITDA margins of 72%.
The firm is the #1 haircare model at Sephora, the #1 bond constructing model in skilled haircare, and it boasts the #1 follower rely on Instagram. Those sorts of accolades, although not essential from a monetary fundamentals perspective, are essential.
What is essential from a monetary fundamentals perspective is that the corporate reported 90% gross sales progress from 2019 to 2020. Such robust outcomes definitely emboldened the corporate to go forward with its IPO in 2021.
And as Olaplex famous in its IPO prospectus:
“Haircare represents a massive, addressable market and presents vital alternatives for progress. In 2020, the market was sized at $77 billion globally and is anticipated to develop at a compound annual charge of ~6% from 2020 to 2025. OLAPLEX participates in the status section of the market, which is anticipated to be the quickest rising section of the worldwide haircare market from 2020 to 2025.”
Takeaway on OLPX Stock
All of the knowledge above suggests OLPX is secure as a inventory, and may develop going ahead.
On the date of publication, Alex Sirois didn’t have (both immediately or not directly) any positions in the securities talked about in this text. The opinions expressed in this text are these of the author, topic to the InvestorPlace.com Publishing Guidelines.
The publish Olaplex Stock Represents a Strong Investment in a Rising Niche appeared first on InvestorPlace.
The views and opinions expressed herein are the views and opinions of the creator and don’t essentially replicate these of Nasdaq, Inc.