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Investing.com -- Loop Capital reiterated its Buy rating on Ulta Beauty (NASDAQ:ULTA) shares, arguing that the “Amazon threat” surrounding the stock appears to have been “overblown.”
The firm’s updated pricing study on Estée Lauder products sold by Amazon (NASDAQ:AMZN) showed that concerns about Ulta Beauty facing an existential threat from Amazon were exaggerated.
The study compared prices of 50 exact "like-for-like" items across makeup, skincare, and haircare categories, finding that Amazon’s prices were on average only 0.2% less expensive than Ulta’s, a decrease from the 1.7% difference observed in October.
Amazon continues to respect list prices for Estée Lauder items, aligning closely with Ulta Beauty’s pricing, according to Loop Capital’s analysis.
In the updated study, Amazon offered a lower price on only 4% of the items, the same price on 96%, and higher prices on none, demonstrating a marginal price difference between the two retailers. The total basket price on Amazon was $3, or 0.1% less expensive than Ulta Beauty’s, compared to a $29, or 1.7% difference in October.
“Given a level pricing playing field, we believe Ulta Beauty has significant advantages over Amazon, including the ability to pick up and return online orders in store and accumulate loyalty program points,” said Anthony Chukumba, a managing director at Loop Capital.
With nearly 45 million loyalty program members, these features contribute to Ulta’s strong position in the beauty retail market. Additionally, Ulta Beauty offers free gifts with purchase on select products, an incentive not matched by Amazon.
“While we plan to continue to periodically compare Ulta Beauty and Amazon’s prices, we now think prior investor concerns about Ulta Beauty facing an "existential Amazon threat" were clearly overblown,” Chukumba said.
Therefore, Loop Capital reiterated a Buy rating and its $480 price target on Amazon stock.