Oddity Tech Ltd. (ODD): growth potential in online cosmetics

Shares of Oddity Tech Ltd. $ODD are currently trading around $47.73 and analysts see a target price of $52, representing nearly 12% upside potential. The company is benefiting from the trend of the cosmetics market shifting to the Internet, where there is only 20% penetration so far, opening up room for further expansion.

Strengths of Oddity Tech

High Profitability:

- Gross margin ~70%, EBITDA margin 20%+, which is at par with established players in the cosmetics industry.

- The company has consistently outperformed Wall Street expectations in every quarter.

New Brands and Expansion:

- Will launch two new brands in the second half of 2025.

- Brand 3: A telehealth platform focused on skin and body issues.

- Brand 4: Details not yet known, but more innovation expected.

- Possible geographic expansion beyond current markets.

Attractive valuation and stability:

- Trades at lower multiples than competitors in the cosmetics and DTC sectors.

- No exposure to China eliminates risk of slowdown in the local economy.

Growth potential

Online cosmetics has huge room for growth:

- Current penetration only 20%, expected to double in the coming years.

- Favourable unit economics: higher average order, profitability and purchase frequency.

Wall Street analyst consensus:

- 5 out of 8 analysts rate the stock a "Strong Buy" or "Buy".

- The $52 price target suggests further upside room.

Short-term catalyst:

- Q4 results will be released on March 11. Analysts expect a slight beat to estimates.

Summary

Oddity Tech $ODD represents a strong investment opportunity due to a combination of high profitability, growth in online cosmetics and innovation. With the upcoming launch of new brands and potential expansion, the company can sustain 20%+ revenue growth and further strengthen its market position.

Risks include overall sentiment in the beauty sector and a possible slowdown in online penetration growth. However, with positive analyst expectations and solid performance, Oddity could be an attractive headline for investors looking for growth potential in digital beauty.