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Investing.com -- The beauty sector continues to show resilience despite broader market volatility, with certain companies standing out as particularly strong performers.
According to recent analysis from Piper Sandler, two names are positioned as the top beauty stocks to watch, with both receiving "Overweight" ratings from the investment firm.
Piper Sandler’s assessment highlights how these beauty retailers are navigating changing consumer preferences and expanding their market presence through strategic initiatives. Both companies have demonstrated strong execution and growth potential that sets them apart in the competitive beauty landscape.
Piper Sandler has initiated coverage on Ulta with an "Overweight" rating and a $590 price target. The firm points to new CEO Kecia Steelman’s "Beauty Unleashed" turnaround strategy as beginning to show positive results, with improvements in both online and in-store traffic and conversion rates at better profitability levels. The company’s focus on newness, exclusives, and compelling events appears to be resonating with consumers.
Following a strong second-quarter performance, Ulta raised its 2025 guidance. Piper Sandler estimates approximately $100 million in sales from Space NK in the second half of 2025, representing about 28% sales growth this year after 34% growth in fiscal 2024. This suggests core Ulta growth in the mid-single-digit range, which analysts consider potentially conservative given easing transaction comparisons and cosmetics trends.
Recently, Ulta Beauty reported strong second-quarter results with comparable sales growth of 6.7%, prompting firms like UBS, DA Davidson, and Raymond James to raise their price targets.
Piper Sandler has also assumed coverage of e.l.f. Beauty with an "Overweight" rating and a $150 price target. The firm cites several positive factors, including signs of category stabilization, a robust innovation pipeline, easing comparisons for the remainder of the year, and pricing increases serving as tailwinds.
The upcoming launch of rhode (launching online and at all stores on September 4) represents another growth catalyst. With the current 11 SKU count, Piper Sandler models first-year Sephora sales at approximately $30 million.
The firm’s estimates for e.l.f. are approximately two percentage points above consensus for fiscal 2026 and 2027 sales, reflecting confidence in the company’s growth trajectory and potential to capitalize on share losses from competitors like CoverGirl.
For its first quarter of fiscal 2026, e.l.f. Beauty posted sales growth of 9.0%, exceeding estimates. Analyst actions have been varied, including an upgrade to Overweight from Morgan Stanley and a downgrade to Hold from Deutsche Bank.
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