Problems at Oddity Tech (ODD)
Oddity Tech (NASDAQ: ODD — $2.25 billion) is an Israeli company that describes itself as “a consumer tech platform built to transform the global beauty and wellness market.” In its July 2023 IPO prospectus, Oddity mentioned “AI” and “machine learning” over 80 times and went public to extreme investor enthusiasm for a high-growth and high-tech makeup company. The Bear Cave sees things differently and believes Oddity is high on hype, but low on substance.
Oddity launched its first brand, makeup company IL Makiage, in 2018 and a second smaller brand, hair and skincare company SpoiledChild, in 2022. Oddity’s sales have grown rapidly from $110 million in 2020 to $222 million in 2021 and $324 million in 2022, roughly 90% of which comes from IL Makiage.
The company wants investors to believe its hypergrowth is from a deep technological edge. For example, its corporate site makes little mention of makeup and instead promotes the company’s “machine learning,” “data science,” “computer vision,” “AI-guided molecular discovery,” “category shifting technology,” and “massive data lake.” In its IPO prospectus Oddity also notes that its R&D hub in Tel Aviv “has attracted talent from elite Israeli technology centers including the Israeli Defense Forces’ Unit 81, its Special Operations Division’s technology unit.” Below, a screenshot from Oddity’s website:
On its site, Oddity also boasts:
“Our proprietary AI matches consumers to the perfect product without ever stepping into a store.”
“We deploy dozens of machine learning models to deliver product recommendations with precision, saving customers time and effort while driving conversion.”
“Our brands deliver radical solutions that disrupt the status quo.”
“AI is replacing the physical store, and empowering consumers with a more fluid future between real and augmented life.”
The Bear Cave thinks not.
In reality, The Bear Cave believes Oddity is a glorified Instagram and Facebook advertiser that has widespread consumer and employee complaints and is endorsed by a firm with a history of public market duds. Let’s dig in.