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Adore Beauty Friday Surge

The Adore Beauty Group Ltd share price rocketed higher today, ending the day up almost 16% at $1.46 a share.

There’s been no news out of the online beauty retailer today. So, this mammoth gain may just be a case of catch-up after the sea of red in the markets. Global investors were fearful after rising numbers were released in the US.

Inflation is the primary trend looking to be fixed by rising interest rates around the world. The RBA raised the official cash rate for the first time since November 2020 earlier this month.

Rising interest rates mean people with mortgages are going to have less disposable income to spend. This is causing a bit of a rotation out of consumer discretionary shares like Adore Beauty. The S&P/ASX 200 Consumer Discretionary Index is down 2.6% over the past month and down 20% over the past six months.

Volatility in ASX share prices can also present buying opportunities. This is particularly so for investors interested in growth shares and smaller market capitalization companies such as Adore Beauty.

On 28 April, the online cosmetics retailer released its latest business update for Q3 FY22. It revealed a revenue gain of 9% on the prior period to $42.7 million. Loyalty members contributed more than 60% of total revenue. Its compound annual growth rate (CAGR) is now 26%.

Active customer numbers increased 7% to 880,000 and returning customers increased 47% compared to the pcp. Plus, the company intends to launch a private label brand in the final quarter of FY22.

Broker UBS likes Adore Beauty’s continued operational growth and its prospects for future revenue growth. The broker says Adore Beauty shares are a buy with a 12-month price target of $4.70. That’s a whopping potential upside of more than 200%.

Adore Beauty boasts a market capitalisation of $118 million with 91.4 million shares on issue.

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