Key Points
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Shares of this cosmetics seller and technology developer bounced on news that it’s reducing its total share count.
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The news comes shortly after Oddity cautioned shareholders that revenue would be sharply lower for the next couple of quarters due to changes in the way it’s able to advertise online.
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Most (if not all) of this bad news was already reflected in the stock’s price, while little of this company’s long-term potential is indicated even after today’s gain.
After losing ground for several months before suffering a near-50% single-day setback in late-February (in response to disappointing forward-looking guidance within its fiscal Q4 report), shares of Oddity Tech (NASDAQ: ODD) are finally fighting back. As of 12:56 p.m. ET Thursday, in fact, shares of this consumer-facing cosmetics technology outfit are up 7%, and at one point were up as much as 16.3%.
The prompt? The announcement of a sizable stock-repurchase program.
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Adding value through the backdoor
Oddity unveiled the new plan this morning. Taking advantage of its stock’s recent weakness, on Thursday, the company announced it’s expanding its previous plan to repurchase $150 million of its own stock by upping the budget to $200 million. Taking these shares out of circulation has the effect of increasing the value of Oddity’s stock still left in investors’ hands. For perspective, prior to today’s gain Oddity Tech’s market cap was roughly $720 million.
Also note, however, that $97 million of the previous $150 million earmarked to fund its buyback had already been used to purchase shares. Thursday’s news essentially doubles what was left of that previous buyback program to implement, to a little over $100 million.
This revised authorization will expire in early 2029.
The scales tip back to net-bullishness… even if risk remains
Stock buybacks are generally bullish, and this one is no exception. But, stock repurchases are also rarely a reason in and of themselves to buy a stock you weren’t already considering owning.
A woman is applying makeup in front of a mirror.
Image source: Getty Images.
The thing is, Oddity Tech also offers enough other reasons to buy its shares, including last year’s and last quarter’s revenue growth of 25% and 23% (respectively), as well as the fact that this DTC cosmetics company is consistently profitable. Although Oddity expects revenue for the quarter currently underway to fall roughly 30% year-over-year due to an adverse change in the way it’s able to advertise its products online (and it didn’t offer full-year guidance at all), management’s belief that a recovery is likely during the second half of this year is plausible. In the meantime, most — if not all — of the bad news is already priced in.
There’s still above-average risk and volatility here to be sure. For those who can stomach it though, there’s a case to be made that today’s surge is a potential catalyst for a prolonged recovery effort.
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James Brumley has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.