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On Friday, TD Cowen analysts adjusted their outlook on ULTA Beauty (NASDAQ: ULTA) shares, lowering the price target to $400 from the previous $450, while maintaining a Hold rating on the stock. The revision follows ULTA’s recent earnings report, which revealed a 19% earnings per share (EPS) beat driven by comparable store sales (comps) that slightly exceeded Wall Street’s expectations. According to InvestingPro data, ULTA’s stock has declined over 11% in the past week, with current analysis suggesting the stock is in oversold territory. For deeper insights, InvestingPro offers 11 additional exclusive tips for ULTA.
Despite the positive earnings surprise, with comps at 1.5% versus the anticipated 0.8%, ULTA’s forecast for fiscal year 2026 presented a less rosy picture. The company’s EPS guidance for FY26 fell short by 3%, projecting comps in the range of 0-1%. While ULTA maintains strong fundamentals with a healthy gross margin of 38.84% and operates with moderate debt levels, analysts at TD Cowen highlighted that one of the most pressing challenges for ULTA is the intensified competition from Sephora and Amazon (NASDAQ:AMZN), which necessitates a stronger focus on exclusive products, new offerings, and improved in-store and inventory management.
The firm’s analysts believe that ULTA is currently lagging behind its competitors in several key areas, including marketplaces, affiliate programs, and digital advertising initiatives. As ULTA undergoes a transition year, the company is expected to encounter several headwinds. These include new Sephora store openings, a normalization in the beauty product category, recent changes in management, and an unpredictable macroeconomic environment.
Looking ahead, TD Cowen suggests that for ULTA to thrive in the long term, it must establish itself as a premier destination for new and emerging beauty brands. The analysts emphasize the importance of a retail strategy that combines a variety of brands and categories, defines and curates wellness concepts, capitalizes on service offerings, and strategically utilizes labor to deliver high-touch customer solutions.
In other recent news, ULTA Beauty reported stronger-than-expected sales and earnings per share (EPS) for the fourth quarter, driven by improved comparable store sales, gross margin, and selling, general, and administrative expenses. Despite these positive results, the company’s guidance for fiscal year 2025 forecasts revenue growth but a decrease in EPS, which did not meet consensus expectations. Following this, multiple analyst firms adjusted their price targets for ULTA Beauty. BMO Capital Markets lowered its target to $404 while maintaining a Market Perform rating, citing the need for clearer visibility on competitive factors. Piper Sandler reduced its price target to $364, keeping a Neutral rating, and noted ongoing near-term challenges despite a better-than-feared outlook.
Similarly, Stifel cut its price target to $400, maintaining a Hold rating, and highlighted ULTA’s investments in brand building and digital capabilities as reasons for the anticipated EPS decline. Canaccord Genuity lowered its target to $526 but reaffirmed a Buy rating, expressing optimism about ULTA’s market share recovery efforts. Barclays (LON:BARC) reduced its target to $327, maintaining an Equal Weight rating, and pointed to intensified competition and internal challenges as factors affecting ULTA’s market share. These adjustments reflect a cautious stance among analysts, who recognize ULTA’s strategic initiatives but remain vigilant about the competitive landscape and market conditions.
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