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ULTA Rises 13% in a Month: Should You Buy, Sell or Hold the Stock?
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Ulta Beauty, Inc. (ULTA - Free Report) stock has climbed 12.9% in the past month compared with the industry and the broader S&P 500 index’s growth of 16.1% and 15.4%, respectively. With Ulta Beauty's massive rise in the past month, investors now face a key decision: Should they hold on to the stock or book profits?
Ulta Beauty One Month Performance Chart
Image Source: Zacks Investment Research
Ulta Beauty’s Strategic Pillars for Sustained Growth and Innovation
Ulta Beauty has revolutionized the beauty space by integrating mass, prestige and luxury brands within an accessible and engaging shopping environment. This unique and differentiated strategy, combined with a commitment to inclusive and welcoming guest experiences, has allowed the company to set new standards in consumer expectations while driving significant profitable growth.
Ulta Beauty is known for its strategy of striking the right balance between online and physical stores. People are effortlessly moving between physical and digital channels as management continues to invest in enhancing guest experience in all touchpoints. E-commerce sales grew mid-single digits in the fourth quarter of fiscal 2024, reflecting the sustained shift toward digital beauty shopping.
Ulta Beauty has been seeing growth in the skincare category, thanks to consumers’ rising interest in self-care and its focus on newness and innovation. In the fourth quarter of fiscal 2024, Ulta Beauty's skincare category achieved mid-single-digit comp growth, driven by strong demand for body care. New brands, including Sol de Janeiro, Naturium and TATCHA, delivered strong performances throughout the quarter.
What Is Weighing on Ulta Beauty’s Momentum?
Ulta Beauty’s fourth-quarter fiscal 2024 results highlighted weakness in key categories, with makeup experiencing a mid-single-digit decline in comparable sales. The decline was largely due to softness in mass makeup, as the category lapped strong innovation and social engagement from the prior year. The makeup category, traditionally one of ULTA’s largest revenue contributors, faces significant risks as it struggles to recover momentum. A continued decline in these categories could hinder the company’s overall growth potential, as these segments are integral to driving traffic and sales.
Another concern is rising operating expenses. In the fourth quarter of fiscal 2024, SG&A rose to 23.4% of net sales, up from 23.1% the prior year, caused by higher store payrolls and benefits. Management expects SG&A expenses to increase approximately 10% in fiscal 2025, primarily caused by strategic investments, higher advertising spending and increased store payroll and benefits. While these investments are necessary for long-term growth, they pose risks in the near term.
ULTA’s Valuation Picture
From a valuation perspective, Ulta Beauty is trading at a premium compared with industry benchmarks. The company’s forward 12-month price-to-earnings multiple of 17.38X remains above the industry average of 16.81X, indicating potential overvaluation relative to its fundamentals.
ULTA P/E Ratio (Forward 12 Months)
Image Source: Zacks Investment Research
What Should Be Your Move on ULTA?
Ulta Beauty’s recent stock rally underscores investor optimism fueled by strong performance in skincare, a resilient omnichannel strategy and continued innovation across its brand portfolio. However, weakness in the makeup category, rising operating expenses and a premium valuation suggest the stock may be pricing in near-term perfection. All said, current investors are likely to benefit from holding, while value investors may want to wait for a better entry point. At present, ULTA carries a Zacks Rank #3 (Hold).
Top Three Picks
Nordstrom, Inc. (JWN - Free Report) operates as a fashion retailer in the United States. The company provides apparel, shoes, beauty, accessories and home goods for women, men, young adults and children, currently holding a Zacks Rank of 2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for Nordstrom’s current fiscal-year sales and earnings indicates a rise of 2.2% and 1.8%, respectively, from the year-ago period’s levels. JWN delivered an earnings surprise of 22.2% in the last reported quarter.
Stitch Fix, Inc. (SFIX - Free Report) sells a range of apparel, shoes and accessories for women's, petite, maternity, men's, plus and kids through its website and mobile application in the United States, currently having a Zacks Rank #2. SFIX delivered an average earnings surprise of 48.9% in the trailing four quarters.
The Zacks Consensus Estimate for Stitch Fix’s current fiscal-year earnings indicates growth of 64.7% from the year-ago figure.
Canada Goose Holdings Inc. (GOOS - Free Report) designs, manufactures and sells performance luxury apparel for men, women, youth, children and babies. It carries a Zacks Rank of 2 at present. GOOS delivered a trailing four-quarter average earnings surprise of 71.3%.
The Zacks Consensus Estimate for Canada Goose’s current fiscal year’s earnings and revenues implies a decline of 1.4% and 4.9%, respectively, from the year-ago actuals.
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ULTA Rises 13% in a Month: Should You Buy, Sell or Hold the Stock?
Ulta Beauty, Inc. (ULTA - Free Report) stock has climbed 12.9% in the past month compared with the industry and the broader S&P 500 index’s growth of 16.1% and 15.4%, respectively. With Ulta Beauty's massive rise in the past month, investors now face a key decision: Should they hold on to the stock or book profits?
Ulta Beauty One Month Performance Chart
Image Source: Zacks Investment Research
Ulta Beauty’s Strategic Pillars for Sustained Growth and Innovation
Ulta Beauty has revolutionized the beauty space by integrating mass, prestige and luxury brands within an accessible and engaging shopping environment. This unique and differentiated strategy, combined with a commitment to inclusive and welcoming guest experiences, has allowed the company to set new standards in consumer expectations while driving significant profitable growth.
Ulta Beauty is known for its strategy of striking the right balance between online and physical stores. People are effortlessly moving between physical and digital channels as management continues to invest in enhancing guest experience in all touchpoints. E-commerce sales grew mid-single digits in the fourth quarter of fiscal 2024, reflecting the sustained shift toward digital beauty shopping.
Ulta Beauty has been seeing growth in the skincare category, thanks to consumers’ rising interest in self-care and its focus on newness and innovation. In the fourth quarter of fiscal 2024, Ulta Beauty's skincare category achieved mid-single-digit comp growth, driven by strong demand for body care. New brands, including Sol de Janeiro, Naturium and TATCHA, delivered strong performances throughout the quarter.
What Is Weighing on Ulta Beauty’s Momentum?
Ulta Beauty’s fourth-quarter fiscal 2024 results highlighted weakness in key categories, with makeup experiencing a mid-single-digit decline in comparable sales. The decline was largely due to softness in mass makeup, as the category lapped strong innovation and social engagement from the prior year. The makeup category, traditionally one of ULTA’s largest revenue contributors, faces significant risks as it struggles to recover momentum. A continued decline in these categories could hinder the company’s overall growth potential, as these segments are integral to driving traffic and sales.
Another concern is rising operating expenses. In the fourth quarter of fiscal 2024, SG&A rose to 23.4% of net sales, up from 23.1% the prior year, caused by higher store payrolls and benefits. Management expects SG&A expenses to increase approximately 10% in fiscal 2025, primarily caused by strategic investments, higher advertising spending and increased store payroll and benefits. While these investments are necessary for long-term growth, they pose risks in the near term.
ULTA’s Valuation Picture
From a valuation perspective, Ulta Beauty is trading at a premium compared with industry benchmarks. The company’s forward 12-month price-to-earnings multiple of 17.38X remains above the industry average of 16.81X, indicating potential overvaluation relative to its fundamentals.
ULTA P/E Ratio (Forward 12 Months)
Image Source: Zacks Investment Research
What Should Be Your Move on ULTA?
Ulta Beauty’s recent stock rally underscores investor optimism fueled by strong performance in skincare, a resilient omnichannel strategy and continued innovation across its brand portfolio. However, weakness in the makeup category, rising operating expenses and a premium valuation suggest the stock may be pricing in near-term perfection. All said, current investors are likely to benefit from holding, while value investors may want to wait for a better entry point. At present, ULTA carries a Zacks Rank #3 (Hold).
Top Three Picks
Nordstrom, Inc. (JWN - Free Report) operates as a fashion retailer in the United States. The company provides apparel, shoes, beauty, accessories and home goods for women, men, young adults and children, currently holding a Zacks Rank of 2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for Nordstrom’s current fiscal-year sales and earnings indicates a rise of 2.2% and 1.8%, respectively, from the year-ago period’s levels. JWN delivered an earnings surprise of 22.2% in the last reported quarter.
Stitch Fix, Inc. (SFIX - Free Report) sells a range of apparel, shoes and accessories for women's, petite, maternity, men's, plus and kids through its website and mobile application in the United States, currently having a Zacks Rank #2. SFIX delivered an average earnings surprise of 48.9% in the trailing four quarters.
The Zacks Consensus Estimate for Stitch Fix’s current fiscal-year earnings indicates growth of 64.7% from the year-ago figure.
Canada Goose Holdings Inc. (GOOS - Free Report) designs, manufactures and sells performance luxury apparel for men, women, youth, children and babies. It carries a Zacks Rank of 2 at present. GOOS delivered a trailing four-quarter average earnings surprise of 71.3%.
The Zacks Consensus Estimate for Canada Goose’s current fiscal year’s earnings and revenues implies a decline of 1.4% and 4.9%, respectively, from the year-ago actuals.