What Happened?
Shares of hair care company Olaplex (NASDAQ: OLPX) fell 3.2% in the morning session after the stock appeared to give back some of its recent gains following a strong prior performance.
The move followed a notable run-up. On the last trading day, the stock price gained almost 6%, and over the previous two weeks, it had risen more than 21%. With no major company news released to drive the price, the decline seemed to be a technical correction or investors taking profits after the recent surge. This view was supported by a generally neutral sentiment based on technical indicators, which suggested a lack of strong directional conviction from traders.
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What Is The Market Telling Us
Olaplex’s shares are extremely volatile and have had 41 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 5 days ago when the stock gained 4.5% on the news that the stock appeared to rebound on technical factors, moving higher without any clear positive news catalyst.
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.
Olaplex is down 28.1% since the beginning of the year, and at $1.22 per share, it is trading 44% 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 $49.59.
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