Oddity's 20% sell-off defies the numbers - J.P. Morgan

Taking another look at Oddity Tech’s (NASDAQ:ODD) second quarter results, there’s really very little not to like. The company beat the street’s expectations for the 9^th consecutive quarter, raised its full-year growth outlook, and reported double-digit growth in its SpoiledChild and IL MAKIAGE brands.  

After the close on Monday, Oddity (NASDAQ:ODD) reported an adjusted profit of $0.92 per share, up 12% year-over-year and 5 cents above expectations. Sales increased 25% to $241M, a quarterly high since going public. The company also raised its profit and sales outlook for FY25 and set guidance for the current quarter above expectations.

So, what’s behind the 20% drop in the share price on Tuesday?

After beating revenue estimates by $6M last quarter, the market reaction seems to reflect a bit of disappointment that Oddity (NASDAQ:ODD) only beat Q2 revenue expectations by $2.6M. Additionally, non-core revenue (Israel retail, marketing affiliates) was down 47% from the same quarter last year, although this represents just 2% of total revenue. 

Nonetheless, investors shouldn’t be reading too much into the stock’s performance, says J.P. Morgan’s Cory Carpenter, who maintains an Overweight rating on the stock with an $82 price target, representing 15% upside to Monday’s closing price.

“We believe the fundamental story remains intact as Oddity executes well across its existing brands and continues to exceed its financial algorithm, with an upcoming catalyst in the Brand 3 launch in Q4,” Carpenter said in Tuesday’s research note to clients.

Accordingly, J.P. Morgan lifted its FY25 sales forecast by 2% to $805M, adjusted EBITDA by 1% to $162M, and EPS estimate by 3.4% to $2.10 per share.

With shares down double-digits, Oddity Tech's (ODD) sell-off is weighing on shares of e.l.f. Beauty (ELF), currently down ~6% in sympathy.