Beauty Health Co. (SKIN) recently saw a 30% decline in its stock after releasing its quarterly results, which showed a decline in net sales for the first quarter. The drop was attributed to customer caution over its flagship delivery system, Syndeo 3.0, and higher interest rates. However, the company managed to exceed projected declines due to steady growth in consumable sales and cost cuts, resulting in positive adjusted Ebitda compared to analyst expectations.
The main issue contributing to the weakness in SKIN’s stock seems to be ongoing technical problems with the Syndeo 3.0 system, despite efforts to address previous customer concerns with older models. Sales forecasts for the upcoming quarter fell short of street expectations, further impacting investor confidence. However, the company remains optimistic that the technical issues with the newest system are relatively minor and can be resolved quickly over the phone, signaling a potential turnaround in the near future.
SKIN expects to return to sequential top-line growth and significantly increase adjusted Ebitda, as it continues to focus on supply-chain improvements and inventory controls. Combining solid demand for consumables with cost-saving initiatives, the company aims to achieve flat to low-single digit net sales growth and generate over $40 million in adjusted Ebitda for the full year. These projections indicate a positive outlook for SKIN’s performance in the coming months.
Investors looking for undervalued opportunities like SKIN can explore the recommendations in Forbes Investor, which includes promising stocks with significant upside potential. The return to solid year-over-year growth and improvements in SKIN’s balance sheet, despite cash burn in Q1, suggest a favorable investment scenario for those willing to ride out short-term fluctuations in the stock market.
Julius Juenemann, CFA, a prominent equity analyst and associate editor at Forbes, offers insights into the potential of stocks like SKIN in the Forbes Investor newsletter. By subscribing to the newsletter, investors can access valuable recommendations and information on undervalued gems that could provide substantial returns in the long run. Despite recent setbacks, SKIN’s efforts to address technical issues and improve its financial position present an opportunity for growth and recovery in the future.
