- Raymond James analysts Olivia Tong and Devin Weinstein have upgraded Ulta Beauty Inc ULTA to Strong Buy from Outperform and raised the price target to $485 from $475, implying a 24% upside.
- The analysts believe the company has good prospects compared to its competitors amidst the volatile macro backdrop.
- They cited the high household income of its consumers (40% earn over $100,000), a mix of prestige and mass brands, a solid pace of innovation in beauty, and solid sales from customers in its loyalty program as reasons to its advantage.
- The analysts note consumer interest in beauty categories has picked up after about two years of stay-at-home practice, supporting sales momentum.
- Meanwhile, Olivia Tong and Devin Weinstein have downgraded Sally Beauty Holdings Inc SBH to Underperform from Market Perform as it has the highest exposure to the low-income consumer in their coverage group.
- The analysts see a downward trend for sales as consumers cut short on spending to compensate for the inflationary streak in necessities like gas and groceries.
- They said customers are leaving long gaps between services to curtail spending levels, and the trend is likely to worsen.
- Supply chain bottlenecks, including out-of-stocks in hair color and appliances, have led to the rescheduling of stylist appointments or choosing non-preferred brands.
- Price Action: SBH shares are trading lower by 4.06% at $11.69 and ULTA higher by 1.47% at $391.56 on the last check Wednesday.
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