By Senad Karaahmetovic
Canaccord Genuity analysts initiated research coverage on Ulta Beauty (NASDAQ:ULTA) with a Buy rating and a $622 per share price target, which implies an upside potential of about 20% relative to yesterday’s closing price.
The analysts are positive on Ulta as it managed to build “the one-stop-shop for all beauty needs.” They believe Ulta will be able to gain more market share thanks to its “strong loyalty program of 40M members and room for growth, continued prestige expansion, and now luxury, and omnichannel and social media presence.”
“We believe the beauty category has shown resilience and should outperform even in a weaker macro environment,” analysts wrote in a client note.
Canaccord’s analysis showed promotional activities in 2023, although analysts believe this is still within the company’s guidance.
On the valuation front, they noted that the P/E ratio is below the 5-year average.
“We believe there is still upside from current valuation as management executes their long-term growth and margin plans, driving FCF, EPS growth, store productivity, and multiple expansion,” the analysts concluded.
Ulta shares are up 11% year-to-date (YTD).