This incredible artificial intelligence (AI) IPO stock just became a bargain, and Wall Street is ignoring it

Investors often love initial public offerings (IPOs). And why not? They’re exciting, and investing in them gives you a first-mover advantage.

These days, however, it’s harder to find great IPOs at investable prices as interest from retail investors has exploded. By the time an IPO stock hits the market, it has often already been bought up by institutional investors for wealthy clients, leaving retail investors in the lurch. Worse, retail investors who want to get in early drive up the price when the opening bell rings, resulting in skyrocketing prices that often immediately fall again.

Considering how the IPO market has changed, it now makes more sense to track a stock candidate going public and see if it remains or becomes a bargain. Oddity Tech (STRANGE 1.75%) is a brand new IPO stock that launched at a high price but has since lost 24% of its value. It’s starting to look like a bargain, and investors should pay attention.

AI advances in the beauty industry

Oddity uses artificial intelligence (AI) to assess individual customer needs in the beauty industry and recommend products accordingly. It incorporates data from more than 40 million customers and over a billion data points to make accurate assessments.

It may be hard to imagine effectively matching skincare without being in a store, but Oddity’s unique PowerMatch system is able to read a customer’s skin tone from a mobile camera and select the right colors and formulas with greater precision recommended than the human eye. according to the company.

This is a game-changer for the beauty industry, which has previously relied on beauty consultants with color charts to accurately match colors. Oddity’s technology allows customers to buy beauty products online with peace of mind, and the company has less risk of returns that could otherwise eat into a large portion of its revenue.

Oddity also operates a social media platform that rewards influencers for creating videos and posting them on Oddity’s website. This continually delivers new content to keep customers engaged with the Oddity brands.

Oddity currently operates under two labels: Il Makiage Cosmetics and SpoiledChild Skincare. The company recently acquired a Boston-based biotech company and renamed it Oddity Labs to develop customized skin care for SpoiledChild.

Customers are engaged and online

Customers love Oddity’s model and the company reports impressive growth. It’s a rare growth company that was already profitable when it went public, and revenue continues to grow quickly while net income also increases.

In the third quarter of 2023, its second quarter as a public company, Oddity maintained its top performance and exceeded its own forecasts. Revenue rose 37% year-over-year to $94 million and gross margin increased to 70.3% from 68.1%. Net income increased from $2.8 million to $3.8 million. Management raised its full-year outlook across all metrics, but expects fourth-quarter revenue growth to slow to about 24% with a gross margin of 66%.

Oddity stands out from the competition

The beauty industry is full of competition, but Oddity fills a niche. Popular beauty brand Eleven beauty is also a popular mass-market brand with a strong web presence, but lacks the technological edge. Ulta Beauty runs a similar business and offers a range of brands at different prices Estee Lauder reaches the upscale consumer through a standard retail and digital model.

Instead of viewing all this competition as a threat, investors should pay attention to the overall growth of a booming industry. According to researchers at McKinsey, the beauty industry is a $430 billion market that is growing at a compound annual growth rate (CAGR) of 6%. However, it is expected to move towards premium and premium beauty is expected to grow at a compound annual growth rate of 8%.

McKinsey reports that beauty e-commerce sales have nearly quadrupled from 2015 to 2021 and penetration has increased to 20% “by a significant margin.” Oddity is at the center of e-commerce and the premium beauty industry and is therefore directly on the path to the most important growth trends in its industry.

CEO Eran Holtzman explained that Oddity uses its extensive data collection to find out where customers’ pain points lie and capitalize on those opportunities. He says that Oddity is the leader in online beauty channels, which are still underdeveloped, and that Oddity will not only invest in the huge potential of Il Makiage and SpoiledChild, but will also launch new brands to gain market share where it is which also gives opportunities for white spaces.

Should you rush to buy Oddity stock?

Curiosity hasn’t yet caught Wall Street’s attention. A month ago it wasn’t covered at all, and now it’s covered by seven Wall Street analysts – four giving it a “buy” rating and three giving it a “hold.” At current prices, Oddity stock trades at a forward price-to-earnings ratio of just 21, which is nothing short of a bargain for a growth stock in its early stages.

However, I would still caution investors. It is a new stock that is always risky because it is still unknown. Additionally, the lock-in period ends in January and prices often drop after the lock-in period ends. But keep it on your watchlist and be ready to snap up shares at the right time.