Olaplex jumps 19% despite earnings miss as debt reduction drives optimism
Hair care company slashes long-term debt by nearly $300M while posting first annual loss since 2020
Olaplex Holdings Inc shares surged 19% on Thursday, defying weak quarterly results as investors focused on the company's aggressive debt reduction efforts and signs of operational stabilization in the beleaguered hair care business.
The Santa Monica-based company reported fourth-quarter adjusted earnings per share of $0.01, missing analyst estimates of $0.0242 by 58.7%. Revenue of $105.1 million fell short of Wall Street expectations of $110.3 million, representing a 4.7% shortfall.
Yet the stock rallied, extending an 11.3% gain from the previous session, as traders looked past the earnings miss to focus on a nearly $300 million reduction in long-term debt over the past year. Long-term debt stood at $352.3 million at year-end, down from $643.7 million a year earlier, including a $300 million voluntary repayment made in May 2025.
"We ended 2025 on a high note with 4.3% sales growth in the fourth quarter," said Amanda Baldwin, Olaplex's chief executive officer. "We delivered on our Bonds & Beyond transformation priorities in 2025, which drove renewed brand momentum, built a consistent innovation pipeline, strengthened execution, and sharpened our strategic focus."
The positive market reaction underscores how dramatically expectations have shifted for a company that went public in 2021 at a valuation of $15 billion. Olaplex now commands a market capitalization of roughly $1 billion after a series of product missteps and lawsuits damaged its reputation with professional stylists and consumers.
For the full fiscal year 2025, Olaplex reported a net loss of $9.3 million, a sharp reversal from net income of $19.5 million in 2024. Adjusted EBITDA declined 27.6% to $93.9 million as margins compressed under competitive pressure.
Management's guidance for fiscal year 2026 offered little cause for celebration, projecting net sales of $414 million to $435 million—essentially flat compared with $423 million in 2025. The company expects adjusted EBITDA margins of 21% to 22%, slightly below the 22.2% achieved in the prior year.
However, analysts noted that the flat guidance may represent a floor rather than a ceiling if the company's turnaround initiatives gain traction. Jefferies maintained a "Buy" rating on the stock despite lowering its price target to $16.25, while Barclays raised its target to $1.75 from $1.25 while keeping a "Hold" rating.
The shares' dramatic rally comes amid heavy trading volume, with roughly six times the average daily turnover changing hands. Short covering likely amplified the move, as traders who had bet against the stock rushed to close positions after the company's debt reduction and cash preservation efforts exceeded expectations.
Specialty retail sales declined 14.5% to $24.7 million in the quarter, reflecting continued challenges in the mass market channel. However, professional sales jumped 18.9% to $36.8 million, suggesting the company may be repairing relationships with salon operators who had abandoned the brand after Olaplex introduced direct-to-consumer channels that undercut them.
Direct-to-consumer sales increased 6.6% to $43.6 million, representing the company's largest revenue stream. Geographic diversification also improved, with international sales rising 7.6% while domestic sales grew just 0.8%.
The company ended the quarter with $318.7 million in cash and equivalents, down from $586 million a year earlier, while inventory decreased to $60.2 million from $75.2 million. The inventory reduction signals better supply chain management after the company struggled with excess stock in 2024.
Management cautioned that first-quarter performance would lag full-year expectations as the company increases marketing spending to support new product launches. The company recently introduced its No.3PLUS Complete Repair Treatment, part of what executives hope will be a more consistent innovation pipeline.
Speculation about a potential takeover has also supported the stock. In January, reports emerged that Germany's Henkel AG had explored an acquisition of Olaplex, sending shares 20% higher in a single session. While no deal has materialized, the possibility remains a backdrop for traders.
Olaplex's ability to restore its premium positioning in the hair care market remains the key question for investors. The company's bond-building technology once made it the darling of salons worldwide, but a series of missteps—including lawsuits over alleged hair damage and the revelation that some products lacked patented ingredients—eroded trust.
The fourth-quarter results suggest the stabilization efforts may be taking hold, but the flat 2026 guidance indicates that meaningful growth remains elusive. With analyst consensus rating the stock a "Hold" and a median price target of $1.88, Thursday's rally may reflect more optimism than fundamentals warrant.