ODD

Executive Summary

ODDITY Tech (ODD) — Deep Value or Value Trap?

ODDITY Tech delivered a record FY2025 with $810M revenue (+25% YoY), 71% gross margins, and $84M free cash flow. However, a Meta advertising algorithm change in late 2025 caused customer acquisition costs to more than double, triggering a ~30% guided Q1 2026 revenue decline and a 50%+ stock crash from ~$29 to ~$12. The stock now trades at a 7.3x trailing P/E — deeply discounted — but the forward outlook is clouded: FY2026 EPS consensus has been slashed 64% from $1.80 to $0.64, and the company has withheld full-year guidance. The core thesis hinges on whether the Meta CAC dislocation is temporary (fixable in 2-3 quarters) or structural (permanent TBYB model impairment). With ~70% repeat revenue and $84M FCF, the balance sheet provides a runway, but the securities class action lawsuit adds further uncertainty. This is a high-risk, high-reward situation best suited for investors with a 12-18 month horizon and strong risk tolerance.

Key Financials

ODDITY Tech by the Numbers — FY2025 Results · AI-Powered Beauty DTC

Revenue (FY2025)

$809.8M

Up 25% YoY · Record year

Adj. Diluted EPS (FY2025)

$2.21

vs. $1.75 in FY2024

Gross Margin

~71%

Industry-leading profitability

Adj. EBITDA Margin

20.2%

FY2025 Adj. EBITDA $163M

Revenue Growth YoY

+25%

Above 20% long-term target · Now guiding -30% Q1 2026

Net Income (FY2025)

$111M

Q4 $6M — sharp sequential decline

Free Cash Flow (FY2025)

$83.6M

Strong cash generation despite headwinds

Platform Users

~68M

~70% of revenue from repeat customers

Quarterly Revenue Trend (FY2025)

$268M

Q1 2025

$241M

Q2 2025

$148M

Q3 2025

$153M

Q4 2025

Growth & Risk Catalysts

Navigating the Ad-Algorithm Crisis

+25%

FY2025 Revenue Growth

Exceeded 20% long-term target for 3rd consecutive year

~70%

Repeat Customer Revenue

High retention insulates base revenue from CAC shock

3 Brands

IL Makiage · SpoiledChild · METHODIQ

METHODIQ (wellness) launch expected to diversify growth

May 18, 2026

Q1 2026 Earnings Release

Critical print: confirms ~30% revenue decline, reveals whether CAC is stabilizing. Consensus EPS: -$0.08 (first-ever quarterly loss).

H2 2026

Meta Algorithm Normalization Window

Management expects material improvement in advertising efficiency in the second half of 2026 as Meta adjusts its algorithms.

2026

METHODIQ Brand Launch

New wellness brand leveraging ODDITY's AI/data platform. Could diversify revenue away from beauty ad-spend dependency.

Ongoing

Securities Class Action Lawsuit

Investors allege ODDITY failed to disclose Meta ad algorithm risks. Outcome could create settlement overhang or be dismissed.

FY2027

Growth Re-acceleration Target

If CAC normalizes, consensus expects return to double-digit growth with EBITDA margin recovery above 18%.

Earnings & Signals

Forward Estimates, Surprises & Insider Activity

Forward Earnings Estimates

FY+1 EPS Consensus$0.64

FY+2 EPS Consensus$1.20

PEG Ratio1.85

Forward P/E34.12

EPS Revisions (90d)↑0 ↓11 (Sharply negative — FY2026 EPS cut 64% from $1.80 to $0.64)

Guidance AccuracyNo FY2026 guidance issued due to CAC uncertainty

Earnings Surprise Track Record

Q1 2025 Est: $0.53 Act: $0.63 +18.9%

Q2 2025 Est: $0.79 Act: $0.76 -3.8%

Q3 2025 Est: $0.24 Act: $0.28 +16.7%

Q4 2025 Est: $0.14 Act: $0.20 +42.9%

Beat Rate75% (3 of 4 quarters)

Insider Activity (90 Days)

Net Buying/SellingNet selling (tax-related RSU vests only)

Sell/Buy Ratio100% sell · 0% open-market buys

Neutral-to-Bearish

CEO sold $385M at $70/share in May 2025. Stock now ~$12.26 (-82%). No insider open-market purchases since ad crisis.

Company	P/E	EV/Rev	Rev Growth	Gross Margin
ODDITY Tech	6.9x	0.64x	25%	72.7%
e.l.f. Beauty	29.3x	2.51x	38%	70.3%
Coty Inc.	N/A	0.84x	-2%	63.2%
Honest Company	N/A	0.78x	~4%	39.7%

Valuation

Price Targets & Scenarios

Scenario	Price Target	Assumptions	Probability
Ad Algorithm Resolution + Growth Re-acceleration	$30.00	Meta algorithm fix restores CAC to near-FY2025 levels by H2 2026. Revenue recovers to 10-15% YoY growth in H2. EBITDA margins re-expand above 18%. METHODIQ launches successfully. Market re-rates toward 20x forward earnings.	20%
Gradual Recovery with Margin Compression	$18.00	CAC partially normalizes by late 2026 but remains elevated vs. FY2025. Revenue declines ~15-20% FY2026 before stabilizing. Adj. EBITDA margin compresses to 12-15%. No full-year guidance given until visibility improves.	55%
Structural CAC Impairment + Competitive Erosion	$8.00	Meta algorithm changes are permanent or worsen. TBYB model becomes structurally unprofitable for new customer acquisition. Revenue declines 30%+ in FY2026 with negative EPS. Class action lawsuit creates additional overhang.	25%

Probability-Weighted Target: $16.90 (+38% from current price)

$16.90

Weighted

Bull $30.0020%

Base $18.0055%

Bear $8.0025%

Analyst Consensus

Bank of America

$10.00

Downgrade to Underperform (from Buy) — Feb 2026

Barclays

$13.00

Downgrade to Underweight (from Equal Weight) — Feb 2026

Evercore ISI

$23.00

Downgrade to In Line (from Outperform) — Feb 2026

Goldman Sachs

$20.00

PT cut to $20 from $50 — Feb 2026

Consensus shifted sharply to Hold after Feb 2026 ad-algorithm shock. 1 Buy, 8 Hold, 2 Sell — avg. PT $18.22 (49% upside from current). Most former bulls moved to sidelines pending CAC resolution.

Technical

Key Levels & Options Intelligence

S/RSupport & Resistance

Current Price

$12.26

50-Day MA

$14.77

200-Day MA

$40.19

RSI (14)

37.5 — Oversold

Support Level

$10.80

Resistance Level

$29.66

52-Week Range

$10.80 – $79.18

OptOptions & Sentiment

Implied Volatility: 107.30% · IV Percentile 99th
Historic Volatility: 61.28%
Put/Call Vol Ratio: 0.39 — Bullish
Put/Call OI Ratio: 0.52 — Bullish (16.2K puts vs 30.8K calls)
Short Interest: 5.61M shares · 17.06% of float
Short % of Float: 17.06% — Elevated vs 9.57% peer avg
Days to Cover: 4.68 days
Options Pricing Signal: Mkt pricing 3.6% move vs 11.4% hist avg

Risk & Ownership

Risk Assessment & Insider Signals

!Risk Factors

Advertising Platform Dependency & Algorithm Crisis: ODDITY disclosed a severe dislocation with its largest advertising partner (Meta) where algorithm changes diverted ads to lower-quality, higher-cost auctions, more than doubling customer acquisition costs. Q1 2026 revenue guided down ~30% YoY.
Securities Class Action Litigation: Multiple securities fraud class actions filed in SDNY alleging ODDITY made misleading statements about AI-driven advertising efficiency while concealing the ad algorithm disruption.
Customer Acquisition Cost Inflation: Digital advertising costs continue to rise industrywide. ODDITY's 100% DTC model means every customer must be acquired online. Ad spend guided ~50% higher YoY in Q1 2026 while revenue declined 30%.
Key Person & Dual-Class Governance Risk: Founder-CEO controls ~75% of voting power through Class B shares despite owning ~23% economically after selling $385M in shares at all-time highs in May 2025.
New Brand Launch Execution Risk: Launching METHODIQ and Brand 4 during an advertising cost crisis amplifies execution risk. The company may be forced to spend more to acquire customers for unproven brands.
Competitive Pressure from Traditional Beauty & DTC Peers: Established beauty companies are accelerating DTC and AI personalization. DTC peers like e.l.f. Beauty have strong omnichannel growth. ODDITY's lack of retail distribution limits acquisition channel diversification.

OOwnership & Insider Signals

Institutional Ownership Decline: Institutional ownership dropped from 74.0% (Sep 2025) to ~23.5% (Dec 2025), reflecting significant loss of institutional confidence.
Baillie Gifford · Largest Institutional Holder: Holds 7.82M shares (~17.33% of float). Added 1.08M shares in Q4 2025, suggesting contrarian conviction.
Catterton Management · Second Largest Holder: Holds 3.54M shares. Consumer-focused PE firm with deep beauty sector expertise.
Founder & CEO Oran Holtzman: ~23% economic ownership, ~75% voting control via 11.55M Class B shares. Sold $385M in May 2025 near highs.
UBS Group AG · Notable Recent Buyer: Purchased 1.33M shares in Q4 2025 during the downturn. Total position ~1.61M shares.
Cash & Balance Sheet: $776M cash + $350M credit facility = ~$1.1B liquidity, substantial vs $695M market cap.

Recommendation

Summary

Rating

HOLD

Conviction

Low

Price Target

$16.90

Timeframe

12-18 mo

Upside

+38%

Position Size

1%-2%

Entry Strategy

Tranche 1 — 40%

~$12.00

Enter post Q1 2026 earnings if revenue decline confirms at -30% (not worse) and management provides CAC stabilization color.

Tranche 2 — 35%

~$10.50

Add on retest of 52-week lows near $10.80 support. Cash per share of ~$13.70 provides margin of safety.

Tranche 3 — 25%

~$15.00

Add on confirmed CAC normalization from Q2/Q3 2026 commentary showing improving ad efficiency.