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Why Is Jim Cramer Bullish on Ulta Beauty?

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Last month, Ulta Beauty (NASDAQ:ULTA) reported a disappointing first-quarter performance. The company’s revenue fell 32.7% year-over-year. Ulta Beauty reported a net loss per share of $1.39 compared to an EPS of $3.26 in the previous year’s quarter. The sales decline due to store closures amid the pandemic and impairment charges of $19.5 million dragged the company’s EPS down. The weak first-quarter performance led to a fall in the company’s stock price. Since reporting the first-quarter earnings on May 28, Ulta Beauty has lost close to 18% of its stock value.

During the earnings call, management announced that the company started to reopen its stores on May 11. As of May 28, the company had opened 333 stores. Ulta Beauty also offered a curbside pickup service from 840 stores. CEO Mary Dillon stated that the sales were stronger-than-expected since the reopening.

On Wednesday, CNBC’s Mad Money host, Jim Cramer, gave a bullish view on Ulta Beauty. In the lightning round on CNBC, Cramer was asked about Ulta Beauty. He replied, “I am all in. I think [CEO] Mary Dillon is doing a great job. Yes, buy Ulta.”

Analysts’ expectations and recommendations for Ulta Beauty

Analysts expect Ulta Beauty to report revenue of $6.5 billion in 2020 and $7.7 billion in 2021. These sales expectations represent a YoY decline of 11.9% in 2020 and a growth of 18.2% in 2021. The decline in comparable-store sales amid the pandemic could drag the company’s revenue down. However, some of the declines could be offset by opening new stores. For this year, the company’s management expects to open between 30 and 40 new stores.

Since Ulta Beauty reported its first-quarter earnings, Barclays and Piper Sandler have upgraded the stock. Also, Oppenheimer, Jefferies, Credit Suisse, Cowen, Guggenheim, Wells Fargo, UBS, Citigroup, Barclays, and Piper Sandler raised their target prices. As of June 24, analysts’ consensus target price was $264.86. The target price represents a 12-month return potential of 32.4%. Overall, 28 analysts cover the stock. Among the 28 analysts, 67.9% recommend a “buy,” while 32.1% recommend a “hold.” None of the analysts recommend a “sell.”

YTD stock performance

So far this year, Ulta Beauty has lost 21% of its stock value. The lower-than-expected first-quarter performance and weakness in the broader equity markets dragged the company’s stock price down. Meanwhile, the company has underperformed the broader equity markets and its peers. During the same period, the S&P 500 Index and Estée Lauder (NYSE:EL) have fallen by 5.6% and 9.1%, respectively.

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