Why Oddity (NASDAQ: ODD) Is Buying Back Its Own Shares

ODDITY Tech Ltd. (NASDAQ: ODD) just made a move that greatly spruced up its appearance for investors. The Israeli tech-savvy cosmetics platform took off by 22% after the company publicized its $150 million stock buyback plans and upped its guidance for 2024 Q2. Originally, it projected $56 million for its EBITDA—they’ve raised this to $60 million. The company also forecasts $189 million in second-quarter revenue, which would be 25% YoY growth. It has been just under a year since the ODDITY IPO, which makes this buyback rather unusual. As management sees it, business has been booming, so they see it as a good time. There may be other reasons as well.

What Is The Point Of a Stock Buyback?

The hefty $150 million is a lot for a small-cap company. ODDITY execs may see this as a way to restore public trust following an incident. Back in May, short-seller Ningi Research accused the "online-only" ODDITY of having undisclosed brick-and-mortar storefronts and exaggerating the capabilities of its AI software. The company confirmed the stores but explained that they only accounted for under 5% of revenue and did not affect its financials. It’s also unusual to update guidance in the middle of a quarter, but this could also be seen as a strategy to boost investor confidence.

What Traders Need To Know

Buybacks are typically seen as a good thing, and the big rise in share price confirms this. However, long-term investors should look closely at the bigger picture. Many analysts will point out that brand-new public companies must build credibility, which can take some time. Despite that, a consensus of eight analysts following ODDITY, which includes Goldman Sachs and Morgan Stanley, rate ODD as a Strong Buy, with an average price target of $53.83 and a high estimate of $66. Shares are currently trading up 1.15% at $44.14.    

Neither Julie Stoller nor Stocks.News has positions in the stocks mentioned in this article.