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On Friday, Morgan Stanley (NYSE:MS) set a new price target for ULTA Beauty stock, raising it to $550 from the previous $460, while maintaining an Overweight rating. The adjustment comes as the firm sees a positive risk/reward scenario for the beauty retailer, with potential upsides and downsides pegged at approximately 45% and 25% respectively to their bull and bear case scenarios. The new price target suggests roughly 20% upside based on the post-market price of $421.79. According to InvestingPro data, eight analysts have recently revised their earnings estimates upward, with analyst targets ranging from $315 to $510.
The optimism from Morgan Stanley follows ULTA Beauty’s performance in the first quarter of 2025, where comparable store sales (comps) increased by 2.9%, surpassing both Wall Street’s expectation of 0.4% and market predictions of 1%. This growth is attributed to the success of ULTA’s Unleashed strategy, which includes improved execution, new brand launches, updated promotional efforts, and marketing initiatives. InvestingPro analysis shows the company maintains strong financial health with a "GREAT" overall score, supported by robust profitability metrics including a 42.78% gross margin and 50% return on equity.
Despite a dynamic consumer environment, with second half 2025 comps expected to range from slightly negative to modestly positive compared to low single-digit percentage growth in the first half, Morgan Stanley believes ULTA has room for further upside. This confidence is based on the assumption that the company can maintain its current momentum in comp and market share gains.
Currently, ULTA’s valuation stands at around 18 times forward year two earnings per share (FY2 P/E), which Morgan Stanley considers reasonable. This valuation is approximately 22% below ULTA’s long-term average P/E ratio. The firm suggests that this presents an attractive entry point for investors, especially for a business that has the potential to drive operating leverage and return to mid-teens earnings before interest and taxes (EBIT) margins, provided the company’s top line continues to show sustainable growth.
In other recent news, Ulta Beauty (NASDAQ:ULTA) reported impressive first-quarter 2025 earnings, with an earnings per share (EPS) of $6.70, significantly surpassing the forecasted $5.75. The company’s revenue also exceeded expectations, reaching $2.85 billion, compared to the anticipated $2.79 billion. This strong performance led to a positive market reaction, with Ulta’s stock seeing a notable increase in after-hours trading. Ulta Beauty’s management has updated its fiscal year 2025 EPS guidance to a range of $22.65 to $23.20, reflecting confidence in continued growth despite potential macroeconomic challenges. Additionally, Bank of America Securities analyst Lorraine Hutchinson raised the company’s stock price target from $380 to $455 while maintaining a neutral rating. The analyst highlighted Ulta’s robust sales and gross margin performance as key factors in the company’s earnings outperformance. Looking ahead, Ulta Beauty projects full-year net sales between $11.5 billion and $11.7 billion, with comparable sales growth expected to range from flat to 1.5%.
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