On Friday, Deutsche Bank (ETR:DBKGn) maintained a Buy rating on ULTA Beauty (NASDAQ: ULTA) while increasing the price target to $459 from the previous $446. The adjustment follows ULTA's third-quarter earnings, which surpassed expectations with a positive same-store sales (SSS) inflection and profitability upside.
The company reported a +0.6% comp growth, outperforming the buy-side expectation of -1.0%, and demonstrated a significant increase in customer traffic. According to InvestingPro data, ULTA maintains a "GREAT" financial health score, with strong profitability metrics including a 42.5% gross margin.
ULTA Beauty's recent performance has been notable in comparison to its competitor Sephora. While Sephora experienced a deceleration in the quarter, ULTA's sales momentum continued to accelerate, with a two-year traffic growth of +9.2% compared to +7.2% in the last quarter. This contrast in sales performance is expected to fuel discussions on market share dynamics in the beauty industry for 2025.
With revenue growth of 5.51% and a market capitalization of $18.51 billion, ULTA continues to strengthen its market position. InvestingPro analysis suggests the stock is currently undervalued, with additional exclusive insights available in the Pro Research Report.
The company also saw gross margin strength, with inventory shrink lower than the previous year and expected to remain flat for the fiscal year. Deutsche Bank anticipates an upside to ULTA's fourth-quarter guidance, citing successful promotional events and improving prestige market share trends. The quarter-to-date performance through Cyber Monday has also been positive.
The analyst from Deutsche Bank expressed increased confidence in ULTA's financial management and its potential for top-line growth. With the expectation of a positive earnings per share (EPS) revision cycle, the firm predicts that ULTA's shares will experience an upward movement following the announcement.
In other recent news, ULTA Beauty exceeded expectations with its third-quarter earnings report, demonstrating a year-over-year sales increase of 1.7% and an unexpected rise in comparable store sales of 0.6%. ULTA also reported a robust earnings beat with an adjusted earnings per share (EPS) of $5.14, outperforming the estimated $4.52 to $4.53. This performance led to an upward adjustment in ULTA's full-year outlook.
Following these results, several analyst firms have revised their price targets for ULTA. Canaccord Genuity increased its target to $500, while Telsey Advisory Group, Goldman Sachs (NYSE:GS), DA Davidson, Raymond (NS:RYMD) James, and Citi also raised their targets.
These revised targets reflect confidence in ULTA's potential to continue regaining prestige market share. The company has successfully navigated competitive pressures, particularly from Sephora's extensive expansion.
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