Why Ulta Beauty Stock Is Still a Buy After Earnings
Ulta Beauty stock is falling Friday after disappointing earnings, but Wall Street isn't worried. Here's what you need to know.
Ulta Beauty (ULTA) stock is trading lower Friday after the beauty retailer fell short of top- and bottom-line expectations for its second quarter and cut its full-year outlook.
In the 13 weeks ended August 3, Ulta's revenue increased 0.9% year-over-year to $2.55 billion, with top-line growth pressured by a 1.2% slump in comparable-store sales. Its earnings per share (EPS) declined 12% from the year-ago period to $5.30.
"While we are encouraged by many positive indicators across our business, our second-quarter performance did not meet our expectations, driven primarily by a decline in comparable -tore sales," said Ulta CEO Dave Kimbell in a statement. "We are clear about the factors that adversely impacted our store performance, and we have actions underway to address the trends."
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The results fell short of analysts' expectations. Wall Street was anticipating revenue of $2.6 billion and earnings of $5.46 per share, according to Yahoo Finance.
"In light of our first-half trends and a more cautious outlook, we have updated our full-year expectations," Kimbell said. Here's what the company now expects to accomplish in its fiscal year versus its previous forecast:
| Metric | New outlook | Previous outlook |
|---|---|---|
| Revenue | $11 billion to $11.2 billion | $11.5 billion to $11.6 billion |
| Comparable-store sales | (2%) to 0% | 2% to 3% |
| Earnings per share | $22.60 to $23.50 | $25.20 to $26 |
Analysts were forecasting revenue of $11.5 billion and earnings of $25.23 per share for Ulta in 2024.
Is Ulta stock a buy, sell or hold?
It's been a rough year on the price charts for Ulta Beauty. While shares got a short-lived boost earlier this month on news Ulta was added to Warren Buffett's Berkshire Hathaway equity portfolio in Q2, they remain more than 27% lower for the year to date. Still, Wall Street remains bullish on the consumer discretionary stock.
According to S&P Global Market Intelligence, the consensus analyst target price for ULTA stock is $413.55, representing implied upside of roughly 16% to current levels. Meanwhile, the consensus recommendation is a Buy.
Financial services firm Oppenheimer has an Outperform rating (equivalent to a Buy) on ULTA stock with a $435 price target.
"We continue to look favorably on ULTA's long-term prospects," says Oppenheimer analyst Rupesh Parikh, citing the company's differentiated offerings, potential to deliver above-average growth rates in retail, and strong management as some of the reasons he is bullish.
"We continue to view ULTA shares as appropriate for longer-term players and would take advantage of any dips from here," Parikh adds.
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