On Monday, Evercore ISI announced a revision to the price target of ULTA Salon (NASDAQ: ULTA), reducing it to $430.00 from the previous $500.00, while maintaining an Outperform rating on the stock. The firm cited several challenges that ULTA is facing, including a slowdown in the beauty category, competitive market share pressures, and recent stock price volatility.
ULTA Salon has been removed from Evercore ISI's Top 5 Outperformers list as the company approaches its second-quarter earnings for 2024. The firm adjusted its second-quarter earnings per share (EPS) estimate for ULTA to $5.43, down from $5.60, and also reduced the full-year 2024 EPS forecast by 4% to $24.50, from the prior estimate of $26.00. This revision comes in light of ULTA's stock rising roughly 19% over the past two weeks.
The firm also adjusted its same-store sales (SSS) estimates for ULTA, lowering the second-quarter SSS growth forecast to 0.5% from 1.5%, and reducing the third-quarter SSS growth to 0.5% from 3%, and the fourth-quarter SSS growth to 1% from 4%. These revisions reflect more conservative expectations compared to the market consensus.
Evercore ISI predicts that ULTA will need to revise its earnings before interest and taxes (EBIT) margin targets during its upcoming analyst day. The firm has lowered its full-year 2024 EBIT margin forecast for ULTA to 13.3% from 13.8%, and the full-year 2025 forecast to 13.0% from 13.9%.
The firm suggests that ULTA may need to negotiate more favorable terms with brands to enhance product offerings and may need to focus on enhancing its promotional strategies through its loyalty program.
The report concludes with a tactical recommendation for ULTA to consider lowering its FY24 margin outlook during the second-quarter earnings call to mitigate the risk of having to adjust its three-year targets at the October Analyst Day.
In other recent news, financial services firm Baird has adjusted its outlook on ULTA Salon, reducing the stock's price target to $485. This adjustment was influenced by mixed demand patterns and heightened market promotional activity. Despite the reduction, Baird maintained an Outperform rating for ULTA Salon. Meanwhile, Citi reduced its price target for ULTA Salon from $400 to $375, citing weaker comparable store sales and lower gross margins.
Berkshire Hathaway (NYSE:BRKa) has also disclosed new investments in Ulta Beauty (NASDAQ:ULTA), owning approximately 690,000 shares valued at $266.3 million. This investment aligns with Berkshire's diverse portfolio, which includes a mix of consumer, retail, and aerospace businesses.
Analyst firm Piper Sandler downgraded ULTA Salon's stock rating from Overweight to Neutral due to concerns about margin pressure. On the other hand, Argus maintained its Buy rating and $485.00 price target for Ulta Beauty, highlighting the company's successful strategies in driving sales.
Lastly, Oppenheimer adjusted its price target for Ulta Salon shares to $450 from the previous $475, while maintaining an Outperform rating.
These are recent developments in the financial sector concerning ULTA Salon.
InvestingPro Insights
Following Evercore ISI's revision of ULTA Salon's price target and earnings forecasts, a glance at the InvestingPro platform reveals additional insights into the company's financial health and market performance. ULTA's management has been actively repurchasing shares, which often signals confidence in the company's future prospects. Despite 10 analysts revising their earnings downwards for the upcoming period, ULTA is still expected to remain profitable this year, with a solid track record over the last twelve months.
InvestingPro Data indicates that ULTA Salon holds a market capitalization of $18.08 billion, with a P/E ratio of 14.64, reflecting investor sentiment on its earnings capacity. The company's revenue has grown by 7.64% over the last twelve months as of Q1 2023, showcasing its ability to increase sales amidst economic challenges. However, the stock has experienced a significant decline over the last six months, with a 31.94% drop in price total return, signaling potential concerns among investors.
For those seeking a deeper analysis, more InvestingPro Tips on ULTA Salon are available, including insights into the company's debt levels, return on assets, and price/book multiple. With additional tips accessible at InvestingPro, investors can make more informed decisions based on comprehensive data and expert analysis.
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