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.
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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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