On Friday, Citi maintained a Neutral rating on ULTA Beauty (NASDAQ: ULTA) stock but increased the price target to $450 from the previous $390. This adjustment follows ULTA's third-quarter earnings per share (EPS) of $5.14, which surpassed the consensus estimate of $4.51.
The better-than-expected results were attributed to stronger comparable store sales (comps), gross margins (GM), and lower selling, general and administrative expenses (SG&A).
ULTA's third-quarter performance, particularly the comps inflection, arrived earlier than market expectations and has led to a pre-market rise in the company's shares. Despite this, management has provided guidance for fourth-quarter comps to be around -2% at the midpoint, aligning with consensus estimates.
The guidance takes into account factors such as a shorter holiday season and fluctuating traffic trends, which Citi views as a conservative estimate. With a market capitalization of $18.5 billion and a current ratio of 1.76, InvestingPro analysis shows ULTA maintains strong liquidity to navigate seasonal fluctuations.
The company's makeup sales, which account for approximately 50% of total sales, showed sequential improvement in the third quarter, with the prestige makeup category remaining stable despite competitive pressures.
This trend bolsters confidence in ULTA's ability to achieve low single-digit positive comps and EBIT margins above approximately 12% in fiscal 2025. The efforts to refine product assortment and deliver more effective promotions are expected to contribute positively.
Despite the competitive environment and industry headwinds, ULTA's third-quarter results suggest the company has a greater ability to navigate its future.
The company currently trades at a P/E ratio of 15.75, and InvestingPro analysis indicates the stock is slightly undervalued based on its proprietary Fair Value model.
For deeper insights into ULTA's valuation and growth prospects, investors can access the comprehensive Pro Research Report, which provides detailed analysis of the company's financial health, market position, and future potential.
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