Health Beauty Stock: Key Discount Catalysts (NASDAQ: SKIN)

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Health Beauty The (SKIN) stock surged after its SPAC deal was struck, but the stock crashed as the market sold off. The owner of HydraFacial was not helped with the departure of the CEO as the valuation of the shares had enriched. My investment thesis is much more bullish on beauty and health with the stock down 50% from highs while offering a bright future in the growing beauty and health sector.

Departure of the CEO

The company has just named Andrew Stanleyick as its new CEO, effective February 7. Mr. Stanleick previously served as Executive Vice President, Americas, at Quoted (COTY) overseeing the portfolio of luxury and consumer brands.

The stock sank largely due to CEO Clint Carnell leaving too soon after the IPO transaction was completed on May 5, 2021. The announcement accompanied the third quarter 2021 earnings report and was completely eclipsed the quarter where earnings crushed the analyst. estimates of $10 million and increased nearly 100% over last year.

Finviz Chart

Source: FinViz

At the time, Beauty Health even raised the revenue forecast for 2021 above analysts’ estimates of between $245 million and $255 million. Following the departure of the CEO at the ICR conference in January, the company confirmed that fourth quarter 2021 revenue was at the high end of the forecast despite office closure issues due to Omicron in some cities in the United States and the United States. worldwide in restrictive countries like Australia.

Growth engines

Unlike other SPAC deals, Beauty Health swept pre-merger forecasts. For Q3’21, HydraFacial increased sales by 97% to $68.1 million. Initial forecasts called for revenue to fall short of even $200 million in 2021 and the company is now targeting numbers closer to the high end of the forecast at $255 million.

The company ended the third quarter of 2021 with a cash balance of $719 million after issuing $650 million in 1.25% convertible bonds maturing in 2026. In addition, Beauty Health forced the redemption of the 16.1 million warrants for cash proceeds of $185 million, pushing the total cash balance to $900 million.

The cash balance is critical as Beauty Health chose the corporate name to signal plans to move to a business beyond HydraFacial. The $900 million war chest will provide the cash needed to complete small transactions in the beauty and health category to build on the products and treatments provided by the company to fully utilize their developed global distribution systems.

Even without the acquisition of a compelling new product or treatment to match current facial treatments, Beauty Health is already innovating on new products with the recent release of an at-home product and an additional skincare booster . The Glow and Go home device was released on November 11, and a new booster collaboration with Epicutis for décolletage launched in September as part of a movement for treatments beyond the face.

Beyond new products, Beauty Health predicts that international locations will eventually generate more revenue than sales in the United States. In the third quarter of 2021, international sales were only $23.1 million, but the company does not distinguish LatAm sales in its financial statements. Obviously though, most sales from the Americas are tied to the United States

Sector reporting table

Source: Beauty Health Q3’21 10-Q

The stock has a market capitalization of just $2.1 billion, making the investment story compelling given the strong execution since the announcement of the SPAC deal and the promise of product expansion combined with additional distribution. Beauty Health is much more convincing with the PS multiple down to 6.5 times sales for the current year. The stock is only trading at 5x 2023 sales, which seems very conservative in light of current catalysts.

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Data by Y-Charts

To take with

The main investor takeaway is that Beauty Health is a much better deal now after the company raised its revenue forecast and the stock fell more than 50% from the highs. The beauty and health market is highly fragmented, providing the company with a great opportunity to build a broad platform.

The stock poses additional risk here with the change in CEO, so investors are unlikely to take on Beauty Health aggressively until the business plan is confirmed under new management. The game plan is to slowly start building a position with the goal of being fully loaded as long as Beauty Health stays on track to achieve long-term goals as the company moves towards 2022 goals.

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