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Valued at a market cap of $17.7 billion, Ulta Beauty, Inc. (ULTA) is a leading specialty beauty retailer in the United States, offering a wide range of cosmetics, skincare, haircare, and fragrance products from over 500 brands, as well as its private label. Based in Bolingbrook, Illinois, it also provides salon services in its stores and sells products through its website and mobile applications.
Shares of the beauty products retailer have underperformed the broader market over the past 52 weeks. ULTA has declined 9.5% over this time frame, while the broader S&P 500 Index ($SPX) has gained 31.8%. In 2024, shares of ULTA are down 23.4%, compared to SPX’s 25.8% increase on a YTD basis.
Narrowing the focus, ULTA has also lagged behind the Consumer Discretionary Select Sector SPDR Fund’s (XLY) 30.6% rise over the past 52 weeks and 23.1% return on a YTD basis.
Ulta Beauty's shares dropped 4% following its Q2 earnings results revealing weaker-than-expected net income of $5.30 and revenue of $2.6 billion. The decline in comparable sales, weaker merchandise margins, and higher SG&A expenses highlighted pressures from cautious consumer spending and rising competition. Furthermore, the company revised its FY24 net sales guidance downward to $11 billion - $11.2 billion and lowered its EPS forecast to $22.60 - $23.50.
For the current fiscal year, ending in January 2025, analysts expect ULTA’s EPS to decline 11.4% year-over-year to $23.07. The company’s earnings surprise history is mixed. It beat the consensus estimates in three of the last four quarters while missing on another occasion.
Among the 28 analysts covering the stock, the consensus rating is a “Moderate Buy.” That’s based on 12 “Strong Buy” ratings, one “Moderate Buy,” 13 “Holds,” and two “Strong Sells.”
This configuration is less bullish than three months ago, with 15 “Strong Buy” ratings on the stock.
On Nov. 27, Dana Telsey from Telsey Advisory reaffirmed a “Buy” rating for Ulta Beauty, setting a price target of $450.
The mean price target of $402.80 represents a premium of only 7.3% to ULTA’s current levels. The Street-high price target of $505, implies a potential upside of 34.6% from the current price.
