Piper Sandler says 'Ulta + Target outranks Sephora', keeps $595 stock PT on ULTA

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Piper Sandler says 'Ulta + Target outranks Sephora', keeps $595 stock PT on ULTA

On Tuesday, Piper Sandler confirmed its positive stance on ULTA Salon ( NASDAQ : ULTA), maintaining an Overweight rating and a $595.00 price target for the company's stock. The firm highlighted that all beauty categories experienced year-over-year growth, countering recent management expectations of a slowdown. Notably, the largest segments for Ulta, skincare, and makeup, saw the least growth, increasing at a low to mid-single-digit rate.

Despite Sephora's continued dominance as the preferred beauty shopping destination, Ulta, in partnership with Target (NYSE: TGT ), collectively holds a higher mindshare than Sephora alone. This survey revealed a 6-point increase in mindshare for Sephora compared to a 5-point gap reported in the previous fall. Nonetheless, Ulta's combined forces with Target managed to surpass Sephora's standing.

The report also pointed out that both Ulta and Sephora enjoy a loyalty penetration of approximately 60%. Although Sephora might be capturing some of Ulta's potential wallet share, the data suggests there is room for both retailers to thrive. The preference for specialty retail and brick-and-mortar stores remains robust, which is a positive sign for the physical retail sector within the beauty industry.

In addition, the market for beauty products continues to expand, providing a favorable backdrop for both Ulta and Sephora. According to Piper Sandler, the ongoing growth in the beauty market and the sustained preference for specialty stores create a scenario in which both companies can coexist and succeed in the competitive landscape.

Piper Sandler's reaffirmation of the $595.00 price target on ULTA Salon stock reflects confidence in the company's ability to navigate the beauty market despite the fierce competition from Sephora and the changing dynamics of consumer preferences.

InvestingPro Insights

Adding to Piper Sandler's optimistic outlook, real-time data from InvestingPro provides a deeper financial perspective on ULTA Salon. With a market capitalization of $21.86 billion and a Price/Earnings (P/E) ratio of 17.33, ULTA is a significant player in the beauty industry. Its P/E ratio, adjusted for the last twelve months as of Q4 2024, is slightly lower at 16.93, suggesting a reasonable valuation in light of its earnings. Additionally, the company has demonstrated robust revenue growth of 9.78% over the same period, underscoring its expanding market presence.

InvestingPro Tips highlight several key aspects for investors considering ULTA's stock. While the stock has experienced a notable decline over the past week, with a one-week total return of -12.87%, it's important to note that the Relative Strength Index (RSI) suggests the stock is currently in oversold territory. This could indicate a potential rebound opportunity for investors. Moreover, ULTA's liquid assets exceed its short-term obligations, which is a positive sign of the company's financial health. However, analysts have tempered their earnings expectations for the upcoming period, with 22 analysts revising their earnings estimates downwards. For those seeking to delve deeper into ULTA's financials and future outlook, there are additional InvestingPro Tips available at https://www.investing.com/pro/ULTA.

Investors looking to access comprehensive analysis and insights can use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription at InvestingPro, where they can find a total of 12 InvestingPro Tips for ULTA Salon.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

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