I'm very bullish on Adore Beauty. Purchased 200,000 shares over the last 9 months because I believe it to be a multi-bagger opportunity over the next 5 years.
Started establishing a network of physical stores with 25+ locations opened by 2027, extrapolate to 50 locations open by 2030. Each store could generate $1.5 million to $3 million in annual revenue.
Currently only 15% of makeup and skincare is sold online. Physical stores will allow the company to participate in the 85% of the industry they have never had access to before. Adore Beauty is likely to become a serious competitor to Mecca and Sephora.
Debt free and store network expansion funded by free cash flow. Active customers growing YOY.
Greater operational efficiency with margins growing substantially in HY25 = EBITDA +98%. EBIT +126%. Gross Margin +2.7%. Evidence that managements margin expansion initiatives (app adoption, private label products, retail media) are bearing fruit.
If (if if if) management achieve their targets then earnings per share will triple or even quadruple over the next 3 year period.
Rejected buyout offer (before store expansion) of $1.30 per share for undervaluing the company. More buyout offers likely in the future.
19 PE ratio if revenue and and earnings (August FY25) continue on the same trajectory as the previous 6 months which would be much too low of a PE ratio for Adore Beauty's future potential. If re-rated to historical PE ratios (mid to high 30s) then we get price target of $1.30-$1.50 per share in 3 months time when the annual report is available.
Personally I have a conservative price target of $2 per share by FY27 but I wouldn't be suprised to see the price on the $3-$5 range by 2030 or before.
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