Tuesday, Stifel, a financial services firm, revised its price target for ULTA Salon (NASDAQ: ULTA), a leading beauty retailer. The new target is set at $475, down from the previous $565, while the firm maintains a Hold rating on the stock.
"We reduce F1Q24 and F2024 comp estimates reflecting recent slowing U.S. mass beauty sales growth, particularly makeup (41% of F2023 sales)," said Stifel analysts in a note.
ULTA is purportedly losing market share to competitors such as Sephora, which is indicative of a consumer shift towards prestige beauty products, and to Amazon (NASDAQ:AMZN) due to its expanded offerings, including high-end brands like Clinique and Lancôme. The revised estimates anticipate a 2.0% comparable store sales (comp) growth for the first quarter of fiscal year 2024, aligning with the consensus. However, a more gradual increase is expected throughout fiscal year 2024, with a modest sequential weakening in the two-year compound annual growth rate (CAGR).
The company's estimated earnings per share (EPS) for the first quarter of fiscal year 2024 have been adjusted to $6.22, slightly below the consensus of $6.29. The full-year fiscal 2024 EPS estimates have also been reduced to $26.22, compared to the consensus of $26.57. This reflects anticipated sales deleverage and expectations for increased marketing expenditures.
Despite the lowered price target and EPS estimates, Stifel sees more potential for upside in ULTA shares leading into the first quarter results of fiscal year 2024. This optimism is based on subdued investor expectations and what is considered an undemanding valuation. However, the firm's Hold rating remains in place due to limited visibility in the near term.
InvestingPro Insights
Amidst the revised price target from Stifel, ULTA Salon's stock performance and financial metrics offer additional context for investors. The company currently has a market capitalization of $19.41 billion and is trading at a price-to-earnings (P/E) ratio of 15.38, suggesting a valuation that is reflective of its earnings. Over the last twelve months, ULTA has reported a gross profit of $4.81 billion, with a robust gross profit margin of 42.95%, indicating strong operational efficiency.
An InvestingPro Tip highlights that ULTA's management has been aggressively buying back shares, which can often be interpreted as a signal of confidence in the company's future prospects and a commitment to enhancing shareholder value. Moreover, analysts have noted that ULTA operates with a moderate level of debt, which may provide financial flexibility and stability.
While the company does not pay dividends, which may be a consideration for income-focused investors, ULTA has been profitable over the last twelve months and analysts predict profitability will continue this year. This is corroborated by ULTA's return on assets of 23.31%, underscoring the company's ability to generate profit from its assets efficiently.
Investors interested in a deeper analysis can find additional InvestingPro Tips on ULTA at https://www.investing.com/pro/ULTA, which includes insights on earnings revisions, valuation multiples, and price trends. There are 11 more tips available that could provide further clarity on ULTA's financial health and market position. To access these tips and more comprehensive investment tools, use the coupon code PRONEWS24 for an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
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