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I’ve been trying to find a brand new inventory to purchase that’s set to learn from the bogus intelligence (AI) revolution however continues to be comparatively unknown. “Fat chance of that!” I hear an imaginary reader muttering.
Maybe, however right here’s what my ideally suited candidate would appear to be:
- An organization utilizing AI in new and probably highly effective methods
- Rising income quickly but already or almost worthwhile
- Very bold administration group, ideally founder-led
- A share worth that isn’t sky-high and ridiculously overvalued
- A market cap below $5bn
I do know, I do know! A inventory that ticks all these bins needs to be as uncommon as unicorn manure.
But, extremely, I believe I’ve discovered one.
Fairly the oddity
The inventory in query is Oddity Tech (NASDAQ: ODD). That is an internet client magnificence agency launched in 2018.
Led by brother-and-sister duo Oran Holtzman and Shiran Holtzman-Erel, Oddity makes use of AI to develop manufacturers and make tailor-made, data-driven product suggestions to prospects.
It at the moment operates two digital manufacturers: Il Makiage, which sells cosmetics, and SpoiledChild, which specialises in hair and skincare merchandise.
The shares solely went public in July 2023. Nonetheless, at $46, they’re down 11% on this time.
Fortunately then, the AI hype practice hasn’t but arrived at this inventory.
Oddity says it’s “constructed to be essentially the most impactful platform of our lifetime“. I’d say that counts as bold!
Intriguingly, the corporate’s market cap is simply $2.6bn. For comparability, L’Oréal‘s market worth is $266bn, or round 100 occasions bigger.
Rising quickly
In 2023, income grew 57% yr on yr to $509m whereas adjusted EBITDA rocketed 173% to $107m.
The agency beat its personal steerage in each single quarter final yr. And it generated $85m in free money move, exiting the yr with $168m in money and no debt.
Wanting forward, administration expects Il Makiage to generate $1bn in gross sales over the following 5 years. And SpoiledChild, which grew 325% final yr, with over half of gross sales from repeat prospects, is on observe for extra stellar development.
In the meantime, its molecule discovery platform, Oddity Labs, is readying manufacturers three and 4 in numerous classes. Fibroquin, its proprietary pores and skin well being molecule, apparently has a stronger efficacy than retinol (a normal ingredient within the magnificence business). This pricked up my ears.
Ticking all my bins
Basically, the corporate is aiming to disrupt the $430bn international magnificence business by changing the in-store expertise with AI and large knowledge.
It claims – convincingly for my part – that 2bn knowledge factors from its 50m+ distinctive prospects can suggest merchandise higher than the human eye of a magnificence marketing consultant.
Nonetheless, that is nonetheless a younger firm. It solely has two manufacturers, so there’s a danger one or each may rapidly fall out of vogue.
Additionally, there’s no assure the wonder business will transfer primarily on-line. Take a look at groceries, for instance. My native Tesco retailer was nonetheless packed on the weekend!
Nonetheless, returning to my laundry checklist of necessities, we are able to see that:
- Founder-led Oddity is utilizing AI to attempt to disrupt a large market
- It’s rising very quick and profitably
- The inventory is buying and selling at 27 occasions forecast earnings, which isn’t sky-high
I don’t suppose this thrilling AI development inventory might be unknown endlessly. So I’m investing whereas it’s nonetheless flying below the radar.
