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Investing.com - TD Cowen has raised its price target on Sally Beauty Holdings (NYSE:SBH) to $16.00 from $13.00 while maintaining a Buy rating on the stock. The upgrade comes as the stock shows strong momentum, with a 63% return over the past six months. According to InvestingPro analysis, SBH appears undervalued at current levels, with several positive indicators supporting the bullish outlook.
The firm cited Sally Beauty’s ongoing modernization efforts, which are showing positive results. These include a 20% growth in marketplaces, 5,000 licensed colorists on demand per week, brand refreshes, and Happy Beauty expansions. The company maintains strong financial health, with InvestingPro data showing a healthy current ratio of 2.4 and liquid assets exceeding short-term obligations.
TD Cowen noted that Sally Beauty faces a "bifurcated consumer" environment where stronger hair color trends are being offset by more frugal middle-income shoppers in the hair care category.
The company is seeing cost savings benefits, with gross margin improving by 50 basis points year-over-year, according to TD Cowen’s analysis.
The research firm highlighted Sally Beauty’s attractive valuation at 7 times FY2 price-to-earnings ratio and approximately $200 million in free cash flow expected for fiscal year 2025.
In other recent news, Sally Beauty Holdings reported its third-quarter 2025 earnings, exceeding analyst expectations. The company achieved an earnings per share (EPS) of $0.51, surpassing the forecasted $0.43, representing an 18.6% surprise. Revenue also outperformed predictions, reaching $933 million compared to the anticipated $928.78 million. Sales declined by 1.0%, which was better than Canaccord Genuity’s estimate of -1.3% and the broader market’s expectation of -1.4%. Comparable sales were down 0.4%, outperforming both analyst estimates of -0.9% and the company’s guidance of flat to down 2%. Following these results, Canaccord Genuity raised its price target for Sally Beauty to $15 from $14, maintaining a Buy rating. These developments reflect strong investor confidence in the company’s performance.
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