What Happened?

Shares of hair care company Olaplex (NASDAQ: OLPX) jumped 4.5% in the afternoon session after the stock appeared to rebound on technical factors. This gain occurred against a backdrop of recent underperformance, as the company's shares had sunk by 18.4% over the previous six months. The hair care brand's financial results also showed signs of weakness. Over the last three years, Olaplex's sales fell at a 17.3% annual rate. During that same period, its earnings per share declined by 50.8% each year, indicating the company struggled with its cost structure as demand shrank. In the previous year, its free cash flow margin also dropped. Given the lack of a fundamental driver, the day's price increase seemed to be a technical move.

After the initial pop the shares cooled down to $1.16, up 4.1% from previous close.

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What Is The Market Telling Us

Olaplex’s shares are extremely volatile and have had 39 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.

The previous big move we wrote about was 27 days ago when the stock gained 6.5% on the news that the company reported third-quarter financial results that beat Wall Street's expectations for revenue and earnings per share, and reaffirmed its full-year guidance. Although the hair care company's net sales fell by 3.8% year-over-year to $114.6 million, the figure came in ahead of analyst forecasts. Similarly, its earnings per share (EPS) of $0.02, while flat compared to the same period in the previous year, also surpassed consensus estimates. Investors appeared to focus on these positive results rather than the year-over-year decline in sales. The company's decision to maintain its full-year sales forecast likely provided an additional layer of confidence, signaling a stable outlook despite the sales dip in the quarter.

Olaplex is down 31.7% since the beginning of the year, and at $1.16 per share, it is trading 46.8% below its 52-week high of $2.17 from December 2024. Investors who bought $1,000 worth of Olaplex’s shares at the IPO in September 2021 would now be looking at an investment worth $47.14.

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