On Wednesday, TD Cowen's analysts adjusted their outlook on ULTA Beauty (NASDAQ: ULTA), increasing the price target to $480 from the previous $450, while maintaining a Hold rating on the shares. The revision follows ULTA's announcement that CEO Dave Kimball, who has been in the role since 2021 and with the company for 11 years, will retire.
The analysts highlighted ULTA's raised guidance as a positive sign for the company's future performance, anticipating modestly positive comparable store sales (comps) and earnings before interest and taxes (EBIT) margins that are expected to exceed the previously stated range of 11.6%-12.4%. This suggests that ULTA could continue to see positive comps into fiscal year 2025, given the relatively easy comparisons with past quarters.
TD Cowen's analysis pointed to a strong holiday season and the success of the Wicked collaboration as likely contributors to the company's performance. However, they also noted that the January winter storm could pose a risk to fourth-quarter traffic. The competitive landscape, especially in prestige makeup and cosmetics, is expected to remain challenging, with Sephora's new openings potentially keeping competition intense.
Looking ahead to fiscal year 2025, the analysts consider the current market estimates to be modest. The Street is projecting comps growth of 1.3% and a decline in earnings per share (EPS) of 2%, following an 8% decrease in fiscal year 2024. Despite the positive guidance and potential for continued growth, the analysts at TD Cowen remain cautious due to the high valuation and ongoing competitive pressures facing ULTA Beauty.
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