UPDATE: Morgan Stanley Downgrades Olaplex Inc (OLPX) to Equalweight

Morgan Stanley analyst Dara Mohsenian downgraded Olaplex Inc (NASDAQ: OLPX) from Overweight to Equalweight with a price target of $6.50 (from $13.00).

The analyst comments "We are downgrading Olaplex to EW from OW after a negative preannouncement with a large reduction in topline/EBITDA guidance for Q3/Q4, with both the severity of the guidance reduction, as well as numerous drivers, clearly creating low visibility. OLPX's guide-down was driven by both macro and competitive pressure, and OLPX's COO is also departing her role, further reducing visibility. Previously, despite building macro/competitive risks, we felt like valuation more than reflected these concerns, but clearly with the news today that call was wrong as the magnitude of pressure is much greater than we expected, driven by weaker consumer demand due to both macro weakness and competitive impacts, as well as inventory reductions. 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, which was more of an open-ended question given the young life cycle of the business which has not
been through past cycles. We believe macro pressures are also exacerbated by an intensifying competitive environment with the success of K18 and increased peer discounting. Net, we are lowering FY22 and FY23 revenue by -15%/-38%, respectively and EBITDA by -20%/-47%, and clearly visibility is very low here, and OLPX will likely need a few quarters to prove stabilization of trends and will now become a show-me story in our minds. We are lowering our PT from $13 to $6.50. based on a ~14.5x CY23 EV/EBITDA multiple (down from ~16x prior), below a high-teens multiple average at higher quality beauty peers given lower visibility."

For an analyst ratings summary and ratings history on Olaplex Inc click here. For more ratings news on Olaplex Inc click here.

Shares of Olaplex Inc closed at $9.79 yesterday.

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