ODDITY is a 97% direct-to-consumer beauty platform whose largest brand, IL MAKIAGE, buys nearly all of its traffic from Meta. A Meta ad-algorithm dislocation pushed acquisition costs up to 2x, and Q2 FY26 revenue fell 25% to $180.5M with IL MAKIAGE first orders down about 40% and repeat down about 20%; management still has no fix date, only a hope of normalisation by year-end. Today's print, the test our July note was waiting for, was passed on the bench rather than the flagship: SpoiledChild is growing 35%+ toward about $350M with 12-month repeat above 100%, METHODIQ is tracking ahead of SpoiledChild's first year, Q2 beat the company's own guide on both lines, and the FY26 outlook was reinstated at adjusted EBITDA of $30–32M, about three times the Street's $10.7M. Q3 is guided to about −5% revenue with $18–20M of EBITDA; FY26 to about −19% (roughly $656M). Net cash is roughly zero ($561M against $550M of 0% notes due 2030 that convert at $92), H1 free cash flow was −$7.5M, 20% of the share count has been retired this year, the CFO has sold about $2.7M of stock since June, and a securities class action is pending. The stock is up about 20% today to $15.64, above every published target but Truist's $16, with zero Buy ratings. We move from SELL to HOLD with a $14.50 weighted target. At about 1.1x FY26 sales the market is paying for SpoiledChild and giving IL MAKIAGE and METHODIQ little, which caps the downside; but until acquisition costs normalise the company is shrinking and burning cash, and that caps the upside too. This is a wait, not a buy or a short.
| Company | P/E (fwd) | EV/Rev | Rev Growth | Gross Margin |
|---|---|---|---|---|
| ODDITY Tech | ≈20x (NTM, aggregator) | ≈1.1x (FY26 guide) | −25% (Q2 FY26) | 68.7% |
| e.l.f. Beauty | 33.6x | 3.83x | +35.5% (Jun qtr) | 71.6% |
| Estée Lauder | 30.5x | 2.83x | +6.3% (Jun qtr) | 75.5% |
| Coty | 8.4x | 0.96x | +1.3% (Jun qtr) | 62.9% |
| Hims and Hers | 77.5x | 2.82x | +38.3% (Q2 26) | 69.5% |
| Method | Implied Value / Share | Weight | Basis |
|---|---|---|---|
| Sum of the parts | $17 | 40% | SpoiledChild at about $350M growing 35% with a 68% gross margin at 1.6x sales = $560M; IL MAKIAGE at an ESTIMATED $250M of FY26 revenue (FY26 guide less SpoiledChild less METHODIQ) shrinking, at 0.5x = $125M; METHODIQ at an ESTIMATED $50M first-year revenue at 2x = $100M. EV $785M plus $11M net cash over 46M shares = $17.3. Brand revenue splits are our estimates from company-stated growth rates, not disclosed figures. |
| EV / EBITDA on FY27 | $13 | 30% | Our FY27 adjusted EBITDA of $60M (about 9% on roughly $680M of revenue, assuming partial normalisation) at 10x = $600M EV, plus net cash, over 46M shares = $13.3. This is the method that says today's price already needs the recovery to happen. |
| EV / Sales on FY26 guide | $14.50 | 30% | About $656M of FY26 revenue (company guide of −19%) at 1.0x, in line with Coty at 0.96x and well below e.l.f. at 3.8x, plus net cash, over 46M shares = $14.5. One times sales for a 68% gross margin DTC business is a floor multiple, not a target. |
| Blended estimate | $15 | 100% | −4% vs. the $15.64 intraday price — the stock reached fair value today |
Three methods land between $13 and $17 and blend to about $15, which is where the stock trades after today's 20% move. That is the whole HOLD argument. The sum of the parts says the market is paying roughly for SpoiledChild and giving the shrinking flagship and the telehealth option very little, so there is a floor. The earnings method says the price already discounts a partial recovery that management cannot yet date. Neither says buy at $15.64, and after a 20% print-day move with 127% implied volatility, neither says short.
| Scenario | Price Target | Assumptions | Probability |
|---|---|---|---|
| Meta normalises, growth returns in 2027 | $23 | IL MAKIAGE acquisition costs normalise by year-end as management hopes, FY27 revenue grows about 12% to roughly $735M with adjusted EBITDA back to about 13% (around $95M). 10x EBITDA, net cash flat, share count near 44M after the remaining buyback. Street targets and ratings follow the numbers up. | 25% |
| Partial recovery, ex-growth flagship | $14 | The Q3 −5% guide is met on easier comparisons and SpoiledChild growth, IL MAKIAGE stabilises at a lower base without regaining share, FY27 revenue roughly flat to +4% with adjusted EBITDA around $60M. The market pays about 10x that, or 1.0x sales, either of which gives $13–15. | 45% |
| No fix, cash goes to buybacks | $8 | The algorithm never normalises, IL MAKIAGE repeat cohorts keep shrinking as fewer first orders feed them, FY27 revenue about $600M with adjusted EBITDA near $20M and free cash flow negative. Buybacks continue anyway, net cash turns negative against the 2030 notes, and the stock trades at 0.6x sales, where Goldman, Barclays and BofA already have it. | 30% |