Market reaction and guidance
Shares of Oddity Tech dropped roughly 7% in premarket trading on Thursday after the company issued guidance showing a steep break from recent trends. Management now expects sales in the first quarter to decline about 30% year over year, reversing a prior growth trajectory that had seen the business expand at more than 20% annually.
Analyst moves
Barclays reduced its recommendation to Underweight, warning that the deterioration could indicate deeper, emerging problems for the company. The bank pointed to the guidance as evidence the business remains heavily dependent on paid digital customer acquisition rather than more durable, organic demand drivers.
JPMorgan Chase also lowered its view on the stock, moving to Neutral from Overweight. The firm described Oddity's first-quarter outlook as "a shock" after the company had produced 11 consecutive quarters of revenue beats and raised outlooks prior to this update.
Catalyst: ad algorithm change
Oddity reported that its largest advertising partner, which represents roughly 25% of company revenue, modified its algorithm in a manner that reduced the platform visibility for the company's "try before you buy" program. Under that initiative, customers pay only for shipping on their first order - a tactic that historically lifts conversion but can increase product returns. The company reported return rates of about 11% in 2024.
The algorithm adjustment led to lower-quality traffic and, in some instances, more than doubled customer acquisition costs across several of Oddity's brands, including IL MAKIAGE, SpoiledChild and MethodIQ. Management identified the problem in late January, and as of the update the issue had not been resolved.
Analyst caution and potential recovery
JPMorgan cautioned that there is limited visibility regarding the timing and magnitude of any recovery. The bank warned that financial results may be pressured for multiple quarters, even under a best-case scenario, owing to a loss of repeat revenue. Still, the firm noted the disruption appears isolated to Oddity and may be remediable over time.
Barclays emphasized that the episode highlights how much of Oddity's growth has been driven by direct response marketing, rather than traditional beauty market dynamics such as word of mouth or product-led loyalty.
Investor tools and screening
Separately, a product called ProPicks AI is noted for evaluating stocks like ODD across a broad set of financial metrics each month. The tool is described as assessing fundamentals, momentum and valuation without bias, and has highlighted past winners including Super Micro Computer (+185%) and AppLovin (+157%).
This report focuses on the company update, market reaction and analyst commentary provided in the company's guidance and brokerage notes.