Stifel, a financial services company, updated its outlook on ULTA Beauty (NASDAQ: ULTA), increasing the price target to $395 from the previous $385.
The firm has chosen to keep a Hold rating on the shares, suggesting a neutral stance on the stock's immediate direction.
The adjustment in the price target to $395 is based on a valuation pegged to 9 times the projected F2026 EBITDA, reflecting a modestly more optimistic view of the stock's potential.
The analyst believes that while there is a slight advantage to holding ULTA shares at their current price, significant outperformance is contingent upon growth within the U.S. beauty sector.
ULTA Beauty's preliminary F2025 earnings per share (EPS) forecast indicates approximately flat year-over-year growth. This outlook aligns with the company's long-term compound annual growth rate (comp) guidance of 3%-4%. However, this is despite the company's ongoing efforts to improve productivity.
The firm's analysis of ULTA's updated operating margin guidance, which is a critical point of interest for investors, suggests that achieving modest leverage based on the long-term comp growth expectations is possible but becomes less probable if growth falls below the anticipated range.
Lastly, the analyst points out that the current growth rate of the U.S. beauty category is in the low-single-digits, which is beneath historical levels. ULTA Beauty's long-term strategy assumes at least a stable market share in a scenario where the beauty category grows at a mid-single-digit rate. This is in contrast to ULTA's current market share, which is in the low-double-digits, an increase from the high-single-digits observed in F2021.
In other recent news, Ulta Beauty (NASDAQ:ULTA) has been the subject of various analyst ratings following the company's revised financial goals and ambitious growth plans. Piper Sandler maintained a Neutral rating, slightly raising Ulta Beauty's price target to $357.
Ulta Beauty recently announced adjustments to its long-term financial goals, forecasting long-term operating margins of 12% and net sales growth of 4%-6%. The company also plans to increase its number of stores to 1,800, up from the previous range of 1,500-1,700, and revealed a new $3 billion share repurchase authorization.
InvestingPro Insights
To complement Stifel's analysis of ULTA Beauty, recent data from InvestingPro offers additional context for investors. ULTA's current P/E ratio stands at 14.79, suggesting a relatively moderate valuation compared to some high-growth stocks in the retail sector. This aligns with Stifel's Hold rating and the modest increase in their price target.
InvestingPro Tips highlight that ULTA operates with a moderate level of debt and maintains liquid assets that exceed short-term obligations. These factors contribute to the company's financial stability, which is crucial as it navigates the challenging low-growth environment in the U.S. beauty sector mentioned in the article.
Despite the flat EPS growth forecast, ULTA has demonstrated profitability over the last twelve months, with a revenue of $11.32 billion and an operating income margin of 13.91%. This profitability, combined with management's aggressive share buyback program (another InvestingPro Tip), may help support the stock price even in a slower growth scenario.
For investors seeking a more comprehensive analysis, InvestingPro offers 6 additional tips for ULTA Beauty, providing deeper insights into the company's financial health and market position.
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