Analysts Divided On Premium For Ulta Salon, Cosmetics & Fragrance

Ulta Salon, Cosmetics & Fragrance, Inc.'s (NASDAQ: ULTA) valuation will remain a sore spot for some investors, although few retailers are seeing comparable success, a couple of analysts said Friday.

Ulta hit a 52-week high of $132.26 in intraday trading earlier Friday after the company posted third-quarter earnings growth of 30 percent and raised its fourth-quarter outlook.

Ulta recently changed hands at $129.49, up 3 percent.

Credit Suisse's Gary Balter raised his target on the beauty products retailer by 15 percent to $150 and reiterated an Outperform rating.

But Morgan Stanley's Simeon Gutman maintained an Equal-Weight rating and $135 target.

The stock is trading "as if 20 percent earnings growth will continue for the next 12 months," said Gutman, who expects the rate to fall back to the mid- to high-teens.

A slight slow-down in same-store sales growth "could lead to some profit taking" at which point Gutman said investors should buy the shares.

Gutman called Ulta "a category killer," but added that he expects current investments by the company will result in flat margins next year.

The company's recent gross margin expansion of 34 basis points is especially noteworthy according to Balter, and stems from a decision last year to slow store growth and de-emphasize product markdowns.

Balter called the margin trend "exactly what is needed" for earnings growth in 2015 and 2016 to exceed the company's current "mid-teens" target.