Market Overview

Fearing Soft Sector Trends, Ulta Beauty Shares Downgraded

Share:
Fearing Soft Sector Trends, Ulta Beauty Shares Downgraded
Related ULTA
Retailers Report Earnings In The Weeks Ahead As They Gear Up For The Holiday Season
The Case For Owning Beaten Up Retail Stocks
Johnson & Johnson, Harley-Davidson Higher on Good 'rd-Quarter Results (GuruFocus)

Ulta Beauty Inc (NASDAQ: ULTA)'s nearly 15 percent sell-off over the past month could be the beginning of the stock's longer-term trend, analysts at Oppenheimer said. The firm's Rupesh Parikh downgrades the stock's rating from Outperform to Perform with a price target lowered from $330 to $270.

Ulta's stock weakness could be attributed to the possibility of Amazon.com, Inc. (NASDAQ: AMZN) jumping in to the beauty space — but this is only half the story, Parikh said in his downgrade note. The other half of the story is that the beauty market as a whole isn't as strong as many believe it to be.

France-based cosmetics company L'Oreal (L'Oreal SA (ADR) (OTC: LRLCY)) reported its earnings last week, which contained "softer commentary," the analyst explained. For example, the company acknowledged the beauty market in the U.S. is "less than [even] last year due to a much [softer] mass market." The company also said the beauty market has been "amazingly slow since January after a lively market in 2016."

"If our read of L'Oreal's assessment is accurate, this, coupled with increased department store discounting, could suggest a less robust US beauty market," the analyst said.

tipranks.png

Based on a revised assessment of a now weaker beauty market, the analyst is predicting decelerating comp trends going forward. Ulta may need to become increasingly promotional, Parikh concluded.

A revised $270 price target assumes Ulta's stock will trade at a 13x multiple on the analyst's fiscal 2018 EBITDA estimate, which is a multiple that is merely in line with its historical average.

Related Links:

For Growth Stocks, Valuation Doesn't Matter... Until It Does

Analyst Sees Opportunity To Buy The Dip In Ulta Beauty, Adds To Conviction List

Latest Ratings for ULTA

DateFirmActionFromTo
Aug 2017Morgan StanleyMaintainsEqual-Weight
Aug 2017BuckinghamMaintainsNeutral
Aug 2017JefferiesMaintainsBuy

View More Analyst Ratings for ULTA
View the Latest Analyst Ratings

Posted-In: Beauty Beauty Retailers Beauty Stocks retailersAnalyst Color Downgrades Price Target Analyst Ratings Best of Benzinga

 

Related Articles (AMZN + LRLCY)

View Comments and Join the Discussion!
Loading...

Partner Center

Loading...