DA Davidson made an adjustment to the price target of ULTA Beauty (NASDAQ: ULTA), lowering it from the previous target of $507.00 to $435.00. Despite the reduction, the firm maintained a Buy rating on the company's stock. The price target adjustment comes after ULTA reported a disappointing second quarter for fiscal year 2024, alongside a downward revision of its guidance.
The shortfall in ULTA's performance has been attributed to a general slowdown in the prestige beauty industry and the company's continued loss of market share within that segment. However, DA Davidson believes that the market share losses are stabilizing and may even start to reverse in the near future.
This projection is partly based on the anticipated impact of Sephora's expansion within Kohl's (NYSE:KSS) stores.
According to the firm, the current dip in ULTA's stock price may present a purchase opportunity, especially for long-term investors who can appreciate the company's strong market position, referred to as a "Best-of-Breed Bison" name.
This perspective is supported by the belief that ULTA's prestige beauty share is expected to recover as Sephora's presence in Kohl's unfolds.
Despite the earnings per share (EPS) guidance being 10% below the consensus at its midpoint, which is likely to negatively affect ULTA's stock, DA Davidson suggests that the current 14x multiple is near an all-time low both on an absolute and relative basis.
The new price target of $435 is based on a 17x multiple applied to the firm's 2025 EPS estimate for ULTA. DA Davidson reaffirms its Buy rating, indicating a belief that the stock's valuation allows for minimal further compression and possibly some upside as the revised guidance reduces investment risk.
In other recent news, ULTA Beauty experienced a series of revisions in stock outlook following its second-quarter earnings report. The company's earnings per share (EPS) of $5.30 did not meet the anticipated Street forecast of $5.47, reflecting weaker sales and profit margins than predicted.
ULTA's management revised its full-year EPS guidance for fiscal year 2024 to a range of $22.60 to $23.50, which falls short of the Street's expectation of $25.25.
Investment firms including Citi, Oppenheimer, TD Cowen, Stifel, and Piper Sandler, adjusted their price targets for ULTA Beauty. Citi reduced its stock's price target to $345, maintaining a neutral stance.
Oppenheimer lowered its target to $435, while maintaining an Outperform rating. TD Cowen revised its target to $395, maintaining a Buy rating. Stifel reduced the price target to $385, keeping a Hold rating, and Piper Sandler adjusted the price target to $356, maintaining a Neutral rating.
ULTA Beauty reported a modest Q2 net sales growth of 0.9% to $2.6 billion but experienced a 1.2% decline in comparable store sales. Despite these challenges, ULTA demonstrated resilience by opening 17 new stores during the quarter.
InvestingPro Insights
Recent data from InvestingPro provides additional context for investors considering ULTA Beauty's stock. The company has a market capitalization of $17.01 billion and is trading at a P/E ratio of 14.29, reflecting a market sentiment that may be weighing the stock's value against its earnings. Adjusted for the last twelve months as of Q1 2025, the P/E ratio stands slightly lower at 13.49. This could signal that the market has already accounted for some of the challenges faced by ULTA. The company's revenue has grown by 7.64% over the last twelve months, indicating a resilient business model despite the slowdown in the prestige beauty industry.
Two notable InvestingPro Tips highlight the company's financial maneuvers and analysts' expectations: ULTA management has been actively engaging in share buybacks, which could be a sign of confidence in the company's future. Conversely, 12 analysts have revised their earnings estimates downwards for the upcoming period, suggesting that there may be concerns about near-term growth prospects. Investors should also note that ULTA operates with a moderate level of debt and has liquid assets that exceed its short-term obligations, which may provide some financial stability in uncertain times.
For those interested in a deeper dive into ULTA's financial health and future prospects, InvestingPro offers additional tips on the company's performance and valuation metrics. These insights can be found at: https://www.investing.com/pro/ULTA
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