On Wednesday, KeyBanc maintained its positive stance on Oddity Tech Ltd (NASDAQ:ODD), reiterating an Overweight rating and a $50.00 price target for the company's stock. The affirmation comes after a group investor lunch with Oddity's CFO Lindsay (NYSE:LNN) Drucker Mann and CSO Evan Zhao, where they addressed and refuted claims from a short seller report released earlier in the day.
The short report had made several allegations against Oddity Tech, which the company's executives clarified during the lunch meeting. They confirmed that Oddity operates approximately 40 brick-and-mortar stores in Israel, which are audited and contribute less than 5% of total revenues and a low single-digit percentage to EBIT.
Furthermore, the executives highlighted that around 20% of sales outside the U.S. originate from markets including the U.K., Australia, and Canada, contrary to the report's claim that sales were limited to Israel.
Another point of contention from the short report was the claim regarding Oddity's subscription model. The company clarified that its subscriptions are entirely opt-in and can be canceled with ease, addressing concerns about customer retention and satisfaction. Additionally, the report's mention of two CFOs was explained by the executives as a result of a two-year transition period, with split finance operations between the U.S. and Israel.
KeyBanc's commentary following the lunch meeting emphasized Oddity Tech's position in the early stages of its growth trajectory. The firm noted the potential for near-term benefits from the company's disruption of the beauty and wellness markets.
Looking further ahead, KeyBanc pointed to Oddity's unique technological and biotech assets as a source of long-term growth opportunities. Specifically, the accelerated expansion of Oddity Lab's molecule discovery platform is expected to boost revenue across current brands and strengthen the prospects for the launch of Brands 3 & 4 in 2025, which will utilize these biotech assets.
InvestingPro Insights
Following KeyBanc's reaffirmation of Oddity Tech Ltd's potential, InvestingPro data provides additional context that may be of interest to investors. The company boasts a gross profit margin of 71.55% over the last twelve months as of Q1 2024, indicating a strong ability to manage costs relative to revenue. This is complemented by a notable revenue growth of 38.75% during the same period, showcasing the company's expanding financial performance.
From an investment standpoint, Oddity Tech is trading at a P/E ratio of 31.94, which adjusts to 25.41 when considering the last twelve months as of Q1 2024. This, paired with a PEG ratio of just 0.38, suggests that the stock may be undervalued relative to its earnings growth. Additionally, the company has experienced a significant stock price change over the past month, with a 16.08% return, though it has seen a decline over the last week.
InvestingPro Tips highlight that Oddity Tech holds more cash than debt on its balance sheet and analysts anticipate sales growth in the current year. These factors, along with the 5 analysts who have revised their earnings upwards for the upcoming period, reinforce the positive outlook expressed by KeyBanc. For those seeking deeper analysis, InvestingPro offers additional tips on Oddity Tech. To access these insights and enhance your investment strategy, use coupon code PRONEWS24 for an extra 10% off a yearly or biyearly Pro and Pro+ subscription.
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