What happened
Shareholders of The Beauty Health Company (SKIN 3.19%) were seeing red this week. The skin care specialist's stock fell 9% through Thursday trading, according to data provided by S&P Global Market Intelligence. That's as compared to a 0.6% drop in the S&P 500 over that time. The drop contributed to a weak year so far for the stock, which is down 11% so far in 2023 despite a rising market.
This week's slump was sparked by a downgrade by a Wall Street firm.
So what
Demand trends are indeed slowing, with first-quarter revenue rising just 14% compared to the prior quarter's 41% spike. Beauty Health in mid-May also reported weaker gross profit margin in the quarter, which ran through late March, along with continued net losses.
Yet demand trends remain strong. Management recently lifted its 2023 sales outlook, in fact, and is now calling for revenue to land between $460 million and $480 million compared to the prior forecast of $450 million to $470 million.
Consumers are enjoying the company's Hydrafacial treatments, and Beauty Health is taking other popular services into key international markets right now. "I am pleased with the growth we achieved in the first quarter and our strong momentum going into Q2," CEO Andrew Stanleick said in a press release.
Now what
Given those generally strong trends, investors shouldn't read too much into short-term sales slowdowns, which are to be expected at times as the company builds up its global business.
That said, the growth stock remains risky due to factors like its small sales base and current net losses. As a result, shareholders can expect continued volatility while Beauty Health works to establish sustainably strong sales and earnings growth.
