Beauty stocks have not been pretty this year. Cosmetics retailer Ulta Beauty Inc. (NASDAQ: ULTA) and Estee Lauder Co. (NYSE: EL) shares are trading down 12.3% and 38.7%, respectively. The performance is downright ugly compared to the 20.2% gain in the benchmark S&P 500 index for 2023.
While beauty stocks were the darlings of Wall Street during the post-pandemic reopening, posting record top and bottom lines, they have soured in 2023 as normalization continues to kick in like a bad hangover. As we move down the list to niche beauty and wellness companies, two low-priced stocks may finally be nearing a bottom as fundamentals improve.
Originally marketed to sell erectile dysfunction (ED) medication and sexual health products through a telehealth platform, Hims & Hers has expanded its scope to include wellness and beauty care products. It offers over-the-counter and prescription medication for hair loss, birth control, anxiety and depression, anti-aging and skincare. It also offers primary care services ranging from sick visits to annual physicals, virtual visits and prescription refills.
Mental health services include therapy, medication management and psychiatry. It offers a network of over 600 licensed medical providers, averaging less than 24 hours between visits to treatment and providing a 24/7 convenient way to access healthcare services. The platform is expanding to new categories, including cardiovascular health and weight management. Hims plans to roll out its weight management services, which will provide GLP-1 agonist weight-loss drugs by the end of the day.
Hyper Growth Mode
Hims continues to grow with 74% subscriber growth, 83% revenue growth and 12% adjusted EBITDA margin YoY growth. The company reported Q2 2023 earnings of a 3-cent EPS loss, beating consensus analyst expectations for a 5-cent EPS loss by 2 cents. Revenues surged 83% YoY to $207.91 million, beating $204.95 million analyst estimates. Subscribers grew 74% YoY to 1.3 million, with expectations of 2 million by year's end. Adjusted EBITDA has grown 12% YoY. The company has no debt.
Hims raised its Q3 2023 revenue guidance to $217 million to $222 million versus $213 million consensus analyst estimates. It raised full-year 2023 revenues of $830 million to $850 million, from previous guidance of $810 million to $830 million, versus $830.75 million consensus analyst estimates.
Hims Co-Founder and CEO Andrew Dudum commented, “This increasingly powerful flywheel model gives us confidence in our ability to achieve and surpass our 2025 target of at least $1.2 billion in revenue and over $100 million in adjusted EBITDA. Indeed, we believe the strength and composition of revenue and overarching durability of the model we're building are pointing towards many years of robust growth and increased profitability ahead.”
His & Hers Health analyst ratings and price targets are at MarketBeat.
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Daily Descending Triangle Breakdown
The daily candlestick chart on HIMS illustrates the descending triangle breakdown as shares collapsed on the flat-bottom horizontal trendline support at $8.08 on its Q2 2023 earnings report. This started a selling spree that has continued to fall to the low 6s. The daily relative strength index (RSI) oscillator fell under the oversold 30-band but is attempting to stall.
The daily market structure low (MSL) triggers a breakout through $6.42. Pullback supports are at $6.01, $5.56, $5.30 and $5.02.
As the stock symbol hints, the Beauty Health Company sells skin care products and services. It's built a community of estheticians and professionals who personalize skin care in over 90 countries. Its flagship product brand, Hydrafacial, is a hydra dermabrasion machine that lets estheticians provide facials charging between $150 to $250 per session.
The machines can range in price from $10,000 up to over $30,000 for the HydraFacial Elite machine. They also market SkinStylus micro-needling and Keravine scalp health. The Beauty Health Company also sells various serums and supplies for its machines depending on the types of treatment.
The company has an installed base of 29,682 Hydrafacial devices as of the first half of 2023, up 29% YoY. The average delivery system selling price rose 3% YoY to $22,900.
Beauty Health reported its Q2 2023 earnings report on Aug. 9, 2023. The company had 3 cents per share in profits, short of the 5 cents per share analyst estimates. Revenues rose 13.5% YoY to $117.5 million, beating $114.5 million analyst estimates.
While the company enjoys double-digit growth, its gross margins have taken a hit, falling to 64.8% in Q2 2023, down from 71% in Q2 2022. The margin drop was attributed to an unfavorable mix shift to refurbished systems and duplicative product costs.
Net loss fell to $3.4 million from $6.3 million in the year-ago period. Adjusted EBITDA rose to $17.8 million, up 15.1% versus $14.6 million in Q2 2022. Nearly half the systems sold eight to 10 years ago are still active.
The Beauty Health Company CEO Andrew Stanleick remarked that consumer engagement was strong with 34% YoY increased volumes in strong consumables net sales to $51.9 million—continued strength in EMEA and APAC. China had 167% YoY net sales growth.
The company is bouncing back from the Syndeo US launch issues, which also impacted gross margins in the quarter. At its own costs, the company exchanged Syndeo devices to protect relationships at a cost to gross margins. They have “greatly” reduced system exchanges.
CEO Stanleick commented, “I am pleased to say we have greatly reduced system exchanges. Today, with the changes I initiated, we are equipped to address issues with over-the-air software updates or in-field support. And we have identified simple component upgrades to enhance the system's durability, and we have begun to replace these components in existing devices in the field.” He expects to target 500 basis points of gross margin expansion by the end of 2025.
Reaffirms 2023 Outlook
The company reaffirms its outlook for full-year 2023 revenues of $600 million to $700 million. Adjusted EBITDA is expected to be from $18 to 19% or $83 million to $91 million. The company plans to expand in China as 41% of consumers are expected to spend on health and beauty products. China generated $23.8 million in the first half of 2023.
August Insider Buying
On Aug. 18, 2023, filings showed insider buying of SKIN shares by members of its Board totaling over $630,000. Chairman Brent Saunders added 59,000 shares for a stake of 6.9% of outstanding shares.
Board member Michael Capellas bought 30,000 shares, and board member Doug Schillinger bought 33,000 shares. The new CFO, Michael Monahan, added 5,000 shares for her 0.27% stake in the company. CEO Stanleick added 16,000 shares for a 0.53% stake in the company.
The Beauty Health Company analyst ratings and price targets are at MarketBeat.
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Daily Descending Trading Channel
The daily candlestick chart on SKIN illustrates the daily descending trend channel, which is responsible for the 27% drop in price for 2023. Each bounce peaks at lower highs, and each fall bottoms at lower lows. The daily MSL triggers above $7.23. The daily RSI is attempting to bounce off the 50-band. Pullback supports are at $6.20, $5.77, $5.28 and $5.00.