Oddity shares tumbled 7% in premarket trading Thursday after Wall Street analysts downgraded the stock following a forecast of 30% year-over-year sales decline in the first quarter. The sharp reversal comes after 11 consecutive quarters of revenue beats, with Barclays cutting the stock to Underweight and JPMorgan Chase downgrading to Neutral.

Barclays cited concerns about Oddity's heavy reliance on paid digital customer acquisition rather than organic brand demand. The expected sales drop stems from an algorithm change at the company's largest advertising partner, which accounts for approximately 25% of revenue. The modification reduced visibility for Oddity's "try before you buy" program, where customers pay only shipping on their first order, leading to higher return rates of about 11% in 2024.

The algorithm change has more than doubled customer acquisition costs across Oddity's brands, including IL MAKIAGE, SpoiledChild, and MethodIQ. JPMorgan warned that financial results could be pressured for multiple quarters even in a best-case scenario, as the company loses repeat revenue. The issue was identified in late January and remains unresolved, creating uncertainty about the timing and scale of recovery.