On Friday, Citi reaffirmed its Neutral stance on ULTA Beauty (NASDAQ: ULTA) shares, maintaining the price target at $345.00. During an investor day in Chicago, ULTA Beauty outlined its long-term financial goals, targeting 4-6% annual sales growth and an EBIT margin of approximately 12.0% starting in fiscal year 2026. However, the company faces near to medium-term challenges due to slower category growth and increased competition.
ULTA Beauty has not provided explicit guidance for fiscal year 2025, but management anticipates EBIT and comparable sales to be below their long-term objectives. Citi's expectations for fiscal year 2025 align with their estimate of $20.75 earnings per share, which suggests an EBIT margin of 11.2% and slight comparable sales growth.
The current business climate for ULTA Beauty is marked by a lack of clarity regarding an upturn in comparable sales and the easing of competitive pressures. There is also uncertainty about whether a 3-4% growth in comparable sales is achievable in a more competitive beauty market. Consequently, Citi anticipates that ULTA Beauty's stock multiple will continue to face pressure compared to its historical average.
Citi's cautious near-term outlook for ULTA Beauty is reflected in the decision to maintain a 90-day negative catalyst watch. This indicates a guarded view on the stock's performance over the next three months due to the aforementioned challenges and uncertainties.
In other recent news, ULTA Beauty has been the focus of several analyst ratings and adjustments to its long-term financial goals. The beauty retailer announced its long-term targets, aiming for a 4-6% sales growth, approximately 12% margin, and low double-digit earnings per share growth. The company also plans to increase its store count by 200 over the next three years and confirmed its fiscal year 2024 guidance.
Analysts from BMO Capital reiterated a Market Perform rating and a $385.00 price target for ULTA, while Stifel raised the price target to $395, maintaining a Hold rating. Piper Sandler also kept a Neutral rating, increasing the price target to $357. Loop Capital reiterated its Buy rating on ULTA Beauty, maintaining a $450 price target.
These are recent developments in the financial landscape of ULTA Beauty, which has also announced a new $3 billion share repurchase authorization. The company's revised financial goals include long-term operating margins of 12% and net sales growth of 4%-6%. Despite a decrease from previous projections, ULTA Beauty plans to expand its number of stores to 1,800, up from the earlier range of 1,500-1,700.
InvestingPro Insights
To complement Citi's analysis of ULTA Beauty, recent data from InvestingPro offers additional context. Despite the challenges outlined in the article, ULTA's financials show some resilience. The company boasts a market capitalization of $17.51 billion and a P/E ratio of 14.81, suggesting a relatively modest valuation compared to its earnings.
InvestingPro Tips highlight that ULTA operates with a moderate level of debt and its liquid assets exceed short-term obligations, indicating a stable financial position. This aligns with the company's ability to navigate the competitive pressures mentioned in the article. Additionally, ULTA has been profitable over the last twelve months, with a revenue of $11.32 billion and a gross profit margin of 42.52%.
However, reflecting the cautious outlook presented by Citi, InvestingPro data shows that ULTA's YTD price total return is -24.14%, and the stock is trading at 64.67% of its 52-week high. This performance data corroborates Citi's decision to maintain a Neutral stance and a 90-day negative catalyst watch.
For investors seeking a more comprehensive analysis, InvestingPro offers 8 additional tips for ULTA Beauty, providing deeper insights into the company's financial health and market position.
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