Ulta Beauty Soars After Strong Q3 Performance

Ulta Beauty, the cosmetics retailer, saw a significant increase in its stock price following a strong performance in the third quarter. The company’s shares surged by 11% in premarket trading on Friday, reaching $473. Despite a 9.2% decline earlier in the year, Ulta Beauty is now being hailed as a promising stock pick for 2023.

Positive sentiment from Wall Street analysts has contributed to the rise in confidence surrounding Ulta Beauty. TD Cowen analyst Oliver Chen expressed his support for the company in a research note, stating that it is shining as a top holiday pick due to its resilience in the beauty market. Chen raised his price target on the stock to $570 from $531 and maintained his Outperform rating.

Ulta Beauty’s impressive results for the third quarter exceeded expectations, leading to an increase in the lower end of its sales and earnings guidance range. Despite ongoing inflationary pressures, the demand for beauty products remains strong.

Chief Executive Dave Kimbell expressed satisfaction with Ulta Beauty’s performance, highlighting healthy traffic trends, increased brand awareness, and an expanded loyalty program with a record number of 42.2 million members.

Although some analysts expressed concerns about the uncertain economic environment and the challenge of inventory shrinkage due to increased shoplifting, Ulta Beauty’s solid results and positive outlook have bolstered investor confidence.

Ulta Beauty’s ability to adapt to market changes and sustain growth amid challenges positions it as a standout player in the cosmetics industry. As the company continues to navigate these obstacles, analysts are optimistic about its long-term potential.

Overall, Ulta Beauty’s impressive third-quarter showing has sparked excitement and optimism among investors, further establishing the company as a leading player in the beauty sector.

Analysts Predict Lower Guidance for Ulta

Citi analyst Kelly Crago anticipates that Ulta may lower its F23 guidance due to slowing category trends and increased promotions and shrink headwinds. In a research note on Nov. 27, Crago stated that the company should take a more cautious view of the holiday season. Crago rates the stock as Neutral with a $440 price target.

However, Chief Financial Officer Scott Settersten provided some reassurance during the earnings conference call. He mentioned that Ulta’s efforts to address inventory shrinkage seem to be making an impact.

DA Davidson analyst Michael Baker also expressed his optimism following the call. In his note, Baker stated that the 3Q results and call helped alleviate investor concerns on various topics. He believes this will lead to a relief rally for Ulta’s shares, especially considering its discounted valuation relative to its historical range. Currently trading at 16 times forward earnings, Ulta falls below its five-year historic average of 22.4 times.

Baker has raised his price target on Ulta to $530 from $495 while maintaining a Buy rating on the stock. He sees Ulta as a core holding in the longer term.

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