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On Friday, TD Cowen analyst Oliver Chen increased the price target for ULTA Beauty (NASDAQ: ULTA) to $465 from $440, while maintaining a Hold rating on the stock. The beauty retailer, currently trading near its 52-week high at $469.60 with a market capitalization of $21.1 billion, has shown strong momentum. Chen’s adjustment reflects his view that there could be potential upside for the stock if comparable store sales (comps) continue to improve from the reported +2.9% in the first quarter. According to InvestingPro analysis, the stock is currently trading slightly above its calculated Fair Value.
The analyst noted that the first quarter’s +2.9% comp was measured against a +1.6% comp in the same quarter of the previous year. Looking back at the previous year’s performance, second, third, and fourth quarter comps were (1.2%), +0.6%, and +1.5%, respectively. ULTA Beauty has provided guidance for full-year comps to be between 0% and +1.5%, which includes projections for low single-digit percentage growth in the first half of the year compared to flat to slightly positive growth in the second half. The company’s financial health remains robust, with InvestingPro data showing a healthy current ratio of 1.67 and impressive gross margins of 42.7%.
Chen suggests that the company’s guidance is conservative, except for the tougher comparison in the fourth quarter. The price target of $465 is based on an 18 times forward-year two earnings multiple, aligning closely with the current P/E ratio of 18.46x. The analyst expressed optimism about ULTA’s ability to compete with Amazon (NASDAQ:AMZN) and Sephora, especially in the prestige category where competition has intensified with ATOM. Factors such as a stable and engaged customer base, the potential for newness and innovation, and an improved digital experience are seen as positive indicators for better future comps. For deeper insights into ULTA’s competitive position and financial metrics, InvestingPro subscribers can access the comprehensive Pro Research Report, which includes detailed analysis of the company’s market position and growth potential.
However, Chen remains cautious, citing a forecast for a +1% comp in fiscal year 2025, which is below the point where occupancy costs are leveraged. This forecast is also under the projected sales, general, and administrative (SG&A) expense growth of +9-10% for the current year, prompting the Hold rating.
In other recent news, ULTA Beauty reported impressive first-quarter results for fiscal year 2025, with a 4.5% year-over-year sales increase to approximately $2.848 billion, surpassing analyst expectations. This performance led the company to raise the high end of its full-year sales and comparable store sales guidance, although uncertainties remain for the second half of the year. Analysts have responded positively, with Canaccord Genuity raising its price target to $542 and maintaining a Buy rating, while UBS increased its target to $525, also affirming a Buy rating. Telsey Advisory Group raised its price target to $520, keeping an Outperform rating, citing ULTA’s strong market presence and strategic initiatives under new CEO Kecia Steelman.
Piper Sandler adjusted its price target to $437, maintaining a Neutral rating due to potential market volatility and margin risks. Meanwhile, BMO Capital Markets increased its price target to $454, holding a Market Perform rating, reflecting confidence in ULTA’s continued performance. Analysts noted ULTA’s effective execution, with improved customer satisfaction and strategic promotional management contributing to strong results. Despite challenges, ULTA’s management remains optimistic, particularly with the fragrance category showing double-digit growth. These developments indicate a cautiously optimistic outlook for ULTA Beauty among analysts.
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