Finding Meaning In Beauty: Stifel Left Ulta Exec Meeting With 'Increased Confidence'

After meeting with Ulta Beauty Inc (NASDAQ: ULTA)'s executive management, Stifel research analysts Mark Astrachan, Claire Chamberlin and Michael Kobrick have placed a Hold rating on Ulta and raised their target price to $325.

Justification For Sidelined Position Amid 'Increased Confidence'

The report noted the Stifel team came away from the management meeting “with increased confidence the company can continue to gain meaningful share of beauty retail sales, benefiting from the accelerating shift from traditional sales channels to specialty retailers, online, and mobile, and attributable to Ulta’s increasing focus on its loyalty program, targeted promotions, and new credit card program. We also attribute strong growth to favorable U.S. beauty trends, particularly prestige and mass makeup and improving skin care growth.”

The analysts said Ulta can achieve comparable same-store sales growth in line with estimates, one of the factors that pushed them to raise their price target.

Overall, the research report highlights greater-than-expected store expansion, continued share gains and an increase in margins all as upside opportunities. However, a weaker cosmetic market, greater competition especially from Amazon.com, Inc. (NASDAQ: AMZN) and fewer store opening are all big risks.

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