The recent 20% price drop in AI beauty tech company Auditi (ODD) is viewed as an unwarranted buying opportunity for a profitable, fast-growing business. Similarly, telehealth company LifeMD (LFMD) is considered heavily undervalued after a 44% sell-off to around $6 per share. This drop is seen as a clear overreaction to temporary GLP-1 drug strategy issues, creating a compelling entry point. The market is ignoring LFMD's diversified and growing underlying business in mental health and other segments. For those bullish on the Buy Now, Pay Later theme, Sezzle (SEZL) is presented as the cheapest and fastest-growing option in the sector following its recent stock decline.

Sezzle (SEZL)

• Sezzle is a Buy Now, Pay Later (BNPL) company that experienced a significant stock drop of 30% to 40% after its Q2 earnings report, despite strong performance metrics.
• The speaker notes it is now significantly cheaper than its competitors like Affirm (AFRM), PayPal (PYPL), and Block (SQ), which owns Afterpay.
• Bullish Fundamentals:
  • Fastest Growth: It is the fastest-growing company in the BNPL sector, growing 60-70% faster than the pure-play leader, Affirm.
  • Strong Margins: It has better gross margins and EBITDA margins compared to competitors.
  • Excellent Metrics: The company boasts an excellent Rule of 40 at 107 and a very low Enterprise Value to Gross Profit to Earnings Growth ratio of 0.23.
• Sector Dynamics:
  • The BNPL model is seen as a disruption to traditional credit cards, especially popular with Generation Z, who tend to dislike credit cards.
  • The model is attractive to consumers as the retailer typically covers the interest, making it a 0% interest loan for the buyer, often structured around bi-weekly paychecks.
  • Retailers have embraced BNPL as it helps them sell more products.
• Risks & Concerns:
  • The speaker questions the long-term viability and psychology of the sector, noting the oddity of financing small purchases like a DoorDash order over several weeks.
  • There is a persistent concern that a recession could negatively impact the sector, as these are essentially micro-loans. However, the speaker notes these fears have been present for years.

Takeaways

• From a purely financial and growth perspective, Sezzle appears to be the strongest and cheapest investment within the BNPL sector.
• The primary investment decision is not about Sezzle's individual performance but whether an investor is comfortable with the risks and long-term outlook of the BNPL sector as a whole.
• The speaker personally hesitates to invest, seeing better opportunities in other sectors without the "question mark" hanging over BNPL, but acknowledges that for those bullish on the sector, Sezzle is likely the best play.

LifeMD (LFMD)

• The speaker personally owns this stock and believes the massive -44% drop after Q2 earnings was a "clear overreaction."
• The stock fell from a high of $15 to around $6, which the speaker views as "heavily undervalued."
• Primary Issues from Q2:
  • The main problem was weakness in the Erectile Dysfunction (ED) segment, an issue also reported by competitor Hims (HIMS). The speaker states LifeMD has already fixed this by tweaking its advertising strategy.
  • The company's strategy to focus exclusively on branded GLP-1s (weight-loss drugs) has hit a major roadblock. Commercial insurance payers are frequently denying coverage, forcing LifeMD to issue refunds and lose customers to competitors who offer compounded (non-branded) versions.
  • The tone on the earnings call was poor and failed to highlight the company's other strengths.
• Underlying Strengths (Bull Case):
  • Diversified Business: The market is overly focused on GLP-1s and ignoring LifeMD's other successful segments:
    • A thriving mental health business (anxiety, SSRIs).
    • A new women's health business for osteoporosis.
    • A newly launched pharmacy.
    • A partnership with LabCorp (LH) for at-home lab testing.
  • Valuation: The stock is "2x cheaper" than its main competitor, Hims.
  • Core Growth: The underlying telehealth business is growing much faster than the reported 21% figure, which is dragged down by a slower-growing legacy segment (WorkSimply).
  • Subscription Model: The LifeMD Plus subscription offers doctor access for $19 a month, which is a compelling offer.

Takeaways

• The speaker is very bullish on LifeMD at its current depressed price, viewing the sell-off as a major overreaction to the temporary GLP-1 strategy issues.
• The investment thesis is that the market is ignoring the company's diversified and growing underlying telehealth business, which makes the stock heavily undervalued.
• While the speaker believes Hims currently has a better GLP-1 strategy, LifeMD's much cheaper valuation and holistic business model make it an attractive investment. The speaker is holding their position.

Auditi (ODD)

• The speaker is extremely bullish on Auditi and "cannot understand" why the stock dropped 20% after what they describe as an "absolutely amazing" quarter with no red flags.
• Core Business:
  • Auditi is an AI-based beauty tech company. Its flagship brand, Il Makiage, uses an AI-powered quiz to perfectly match foundation color to a customer's skin, creating a "very, very sticky customer base."
  • The company is a brand-building machine, with its second brand, Spoiled Child, on track to become a billion-dollar brand by 2028.
  • They are actively developing Brand3 (a prescription-based dermatology company) and Brand4.
• Financial Strength:
  • The company is growing revenue "on all cylinders" and is profitable.
  • It has a strong Rule of 40 at 55.
  • The speaker considers the stock "cheap" based on its growth metrics.
  • There is an active share buyback program with $103 million remaining, which should reduce the number of shares outstanding and increase earnings per share over time.

Takeaways

• The speaker sees the 20% sell-off as a completely "unwarranted" buying opportunity.
• Auditi is presented as a high-quality, innovative company with a strong competitive advantage through its use of AI, a proven ability to build successful brands, strong profitability, and a shareholder-friendly buyback program.
• The investment thesis is straightforward: buy a great company that is growing fast, is profitable, and has recently become cheaper for no apparent reason.