Generally speaking financial traders didn’t pay much attention to California-based hair-products maker Olaplex Holdings (NASDAQ:OLPX) until recently. After a successful initial public offering (IPO), however, the buzz surrounding OLPX stock is getting louder.
I won’t pretend that Olaplex is the world’s biggest hair-care product manufacturer. This company is growing quickly, however, to the point where Olaplex is a real threat to its competitors.
As we’ll see, OLPX stock moved quickly to the upside on the day of its public trading debut. Yet, it has settled into a range since that time, thereby allowing investors a chance to pick up some shares at a reasonable price point.
We’ll also discover that Olaplex has unique products and a loyal following on social media. This could be a “story stock” and a ground-floor opportunity worth pursuing, so let’s delve into the price action we’ve witnessed so far.
A Closer Look at OLPX Stock
At first, Olaplex had established a target price range of $14 to $16 for its IPO. Later, the company raised that range to $17 to $19 per share.
On Sept. 29, however, OLPX stock started trading on the Nasdaq Exchange at $25. Very quickly, the share price hit $26.50 for a nice gain.
The momentum continued in early October, with the stock reaching a peak of $27.74. As of Oct. 14, though, the Olaplex share price had cooled off to $25 and change.
It feels as if the market is still trying to figure out how to properly price OLPX stock (a phenomenon known as price discovery). Will it be a $50 a year from now, or will it ease back to $20?
Only time will tell, but there are reasons for long-term investors to be bullish on Olaplex.
I’m certainly not an expert on hair-care products (and honestly, I don’t have much hair on my head left).
Yet, I know a unique product line when I see it.
Olaplex was founded in 2014 out of a garage, and now the company employs 82 full-time staff members. Early investors in Olaplex include private equity firm Advent International.
Dean Christal is Olaplex’s founder and former CEO, and he came from the world of hair care. It’s amazing to consider that today, Olaplex has a global market footprint that spans more than 100 countries.
Granted, hair care is a crowded field. Still, Olaplex has a special, differentiating ingredient: Bis-Aminopropyl Diglycol Dimaleate, which forms the cornerstone of its patented technology.
The company also holds over 100 other patents, and insists on using only only non-toxic chemicals.
Moreover, Olaplex is effectively creating a new category of hair care called “bond-building.”
This isn’t just cleaning or coloring the hair. Rather, it’s described as the process of protecting, strengthening and rebuilding broken bonds in the hair during and after hair-care services.
Growing with a Loyal Following
Olaplex had a humble beginning, but the company has expanded quickly.
Believe it or not, the net sales of Olaplex’s bond-building hair-care products skyrocketed from $148.2 million in 2019, to $282.3 million in 2020.
That represents a growth rate of 90%. Plus, during that same time period, Olaplex ascended from the number-three independent hair-care brand to number one.
Matthew Kennedy, senior IPO market strategist at Renaissance Capital, observed Olaplex’s “explosive growth and industry leading margins,” while also noting the company’s “strong customer following” and “superior product.”
Some folks might even say that Olaplex has a cult following, but don’t take that as an insult.
The brand has seen 380 million views on the TikTok social media platform – not too bad for a start-up that originated in a garage, you must admit.
The Bottom Line
Clearly, there’s a groundswell of support among Olaplex’s loyal consumers.
Thus, even in a crowded hair-care market, there’s room for this company to expand its presence.
Besides, Olaplex has unique products and seems to be creating its own category.
So, OLPX stock could reach $50 at some point – maybe sooner than you think.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.