Ulta Beauty on the Street: Why Analysts See a Further Upside
As of March 10, 2017, 14 out of 23 analysts surveyed (61%) had issued a “buy” recommendation for Ulta Beauty (ULTA) stock. Nine analysts have given a “hold” rating, while none has issued a “sell” recommendation.
As mentioned in previous parts of this series, Ulta Beauty exceeded analysts’ sales and earnings’ expectations for fiscal 4Q16. The company announced its fiscal 4Q16 results after the financial markets closed on March 9. On March 13, RBC Capital reiterated its “sector perform” rating for Ulta Beauty stock and raised its price target to $285 from $278.
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On March 11, 2017, Instinet reiterated its “buy” recommendation for Ulta stock, raising its price target to $297 from $294.
Consensus “buy” rating
Ulta Beauty has delivered strong sales and earnings growth over the past several quarters. The company offers an extensive collection of mass and prestigious beauty brands. As of January 28, 2017, the company operated 974 retail stores in 48 states and the District of Columbia. As we discussed in Part 5 of this series, the company plans to open 100 new stores in fiscal 2017.
Aside from attractive beauty offerings, Ulta Beauty’s salon services are also a key attraction for the customers. In fiscal 2016, salon sales grew 15.2% to $241.1 million. The company is also enhancing its online presence. In fiscal 2016, the company’s comparable online sales grew 56.2% to $345.3 million.
Ulta has proven its strength, particularly at a time when key players in the retail market have struggled amid intense competition from online retailers like Amazon.com (AMZN). In fiscal 2016, Ulta Beauty’s sales grew 23.7% to $4.9 billion. Notably, large established players Wal-Mart Stores (WMT) and Macy’s (M), both of which sell beauty products in their stores and delivered top-line growth of 0.8% and -4.8%, respectively, in the comparable fiscal year.
12-month price target
As of March 10, the average 12-month price target for Ulta Beauty stock was $304.95. This price target represents a 6.5% upside potential, as compared to its closing stock price of $286.42 on March 10. Ulta Beauty stock has risen 12.3% on a year-to-date basis.
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