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On Friday, Citi analyst Susan Anderson increased the price target for ULTA Beauty (NASDAQ: ULTA) to $425 from the previous target of $365, while maintaining a Neutral rating on the company’s shares. The beauty retail giant, with an $18.5 billion market cap and annual revenue of $11.3 billion, maintains a "GREAT" financial health score according to InvestingPro analysis, which offers comprehensive insights through its Pro Research Report covering 1,400+ top US stocks. Anderson predicts that ULTA Beauty will surpass first-quarter earnings per share (EPS) expectations when it reports on May 29, after the market closes, with an estimate of $5.99 compared to the Visible Alpha consensus of $5.78. The anticipated beat is attributed to stronger-than-expected comparable store sales (comps) and a slight improvement in gross margins, building on the company’s already robust 42.8% gross margin over the last twelve months.
Anderson noted that after a variable start to the first quarter, ULTA Beauty’s successful "21 Days of Beauty" event in March and a robust product pipeline likely contributed to the company’s performance. Looking ahead to the second quarter, she expects comps to accelerate, projecting a 4% increase. This is due to the company lapping a weaker second quarter in the previous year and benefiting from a more effective promotional strategy and a stronger merchandise assortment.
Despite the forecasted first-quarter beat, Anderson anticipates that ULTA Beauty’s management will maintain its current financial guidance through fiscal year 2025. She acknowledges that the first half of the year is shaping up better than expected, although the beauty sector overall has been weak. Trading at a P/E ratio of 16.2x, InvestingPro analysis suggests the stock is currently undervalued, with additional insights available through its exclusive Fair Value model and six key ProTips. However, she cautions that the second half of the year presents more challenging comparisons and that ULTA will continue to face an intense competitive environment with key brands expanding their distribution significantly.
Anderson concludes that while the first-quarter earnings are expected to outperform, the firm’s stance on ULTA Beauty stock remains neutral. The firm is waiting for more evidence that ULTA can consistently achieve a 3% or higher comp growth rate, which aligns with its long-term goals. Nevertheless, Citi sees a favorable risk/reward scenario for ULTA Beauty leading into the first-quarter earnings report, supported by the company’s strong return on equity of 50% and aggressive share buyback program.
In other recent news, ULTA Beauty has been the focus of several analyst updates and evaluations. JPMorgan reiterated its Overweight rating with a $475 price target, noting a slight improvement in beauty product sales trends, which aligns with ULTA’s forecast of same-store sales growth nearing the low end of its annual range. Similarly, UBS maintained its Buy rating and $490 price target, citing market share stabilization and manageable tariff impacts. Goldman Sachs upgraded ULTA’s rating from Neutral to Buy and raised the price target to $423, highlighting strong sales momentum and favorable product introductions.
DA Davidson maintained a Buy rating with a $415 target, despite acknowledging a slowdown due to decreased consumer confidence and increased online competition. BMO Capital kept its Market Perform rating and $404 price target, pointing out shifts in ULTA’s product mix and increased investment as part of its strategic growth efforts. These developments suggest that ULTA Beauty is navigating a challenging economic landscape with potential for growth, as noted by multiple analysts. Investors are likely to monitor these insights closely as they consider ULTA’s future performance.
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