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On Tuesday, Deutsche Bank revised its price target for ULTA Salon (NASDAQ: ULTA) shares, lowering it to $448 from the previous $552, while sustaining a Buy rating on the stock. The adjustment comes ahead of ULTA's earnings report scheduled for August 29, after market close.
The firm acknowledges a decrease in their second quarter and second half same-store sales (SSS) and earnings per share (EPS) forecasts for ULTA but believes that concerns over slowing sales trends and the potential for a guidance cut have already been factored into the market's expectations.
The focus for investors, according to Deutsche Bank, is likely to shift towards ULTA's outlook for the second half operating margin. This shift is expected to provide insight into the company's upcoming Investor Day and offer a perspective on the business's margin profile in a competitive and slower sales growth environment. Deutsche Bank anticipates a 13% operating margin for the full year, contrary to market expectations, which seem to suggest a 12% EBIT margin.
Despite a more competitive and promotional landscape, along with normalizing industry growth, Deutsche Bank foresees ULTA leveraging its loyalty program and marketing strategies to regain market share and adjust its full-year EPS guidance to a range of $23.25-$24.00.
This is compared to Deutsche Bank's own estimate of $23.70 and a consensus of $25.45. The firm views this anticipated reset as establishing a base for profitability and envisions a path to $25 or more in EPS by 2025.
Deutsche Bank's analysis concludes that ULTA shares present an attractive investment opportunity, trading at approximately 15 times the projected 2025 EPS, making it a compelling buy in their view.
InvestingPro Insights
As ULTA Salon (NASDAQ: ULTA) approaches its earnings report, investors may benefit from additional insights provided by InvestingPro. Notably, ULTA's management has been actively repurchasing shares, a sign that could be interpreted as confidence in the company's future prospects. Moreover, the company's liquid assets have surpassed its short-term obligations, indicating a strong liquidity position that may support operational flexibility even in a competitive retail environment.
InvestingPro Data underscores this with a robust market capitalization of $17.76 billion and a Price/Earnings (P/E) ratio of 14.47, suggesting that ULTA is trading at a premium relative to near-term earnings growth. However, this premium pricing is accompanied by a high Price/Book ratio of 7.7, which may warrant investor caution. The company has shown a revenue growth of 7.64% over the last twelve months as of Q1 2025, reflecting a positive sales trajectory.
To further inform investment decisions, there are 11 additional InvestingPro Tips available, which delve deeper into ULTA's financial health and market positioning. For those seeking a more comprehensive analysis, these tips can be found at InvestingPro's dedicated ULTA page.
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