VladimirFLoyd/iStock via Getty Images Investment Thesis In my previous coverage of Ulta Beauty ( NASDAQ: ULTA ), I mentioned my surprise at the sudden downward revision in the cosmetics & beauty chain’s FY24 outlook that was expressed by management in a previous Retail RoundUp conference . The reason this downward revision caught me off guard at the time was because it occurred in a span of 2-3 weeks after the company set full year expectations in their disappointing FY23 earnings report . Since then, the company’s stock has fallen below the $408 level that I had estimated the company’s share price at, as seen in Exhibit A below.
Exhibit A: Ulta Beauty’s stock performance since the author's previous coverage (Seeking Alpha) In my current analysis of Ulta Beauty, I do not see any significant improvement since my previous coverage. Demand for the company's products has not picked up yet, while inventory levels appear to be relatively elevated but range-bound. However, I believe most of the pessimism in the stock now appears to be priced in based on my new estimates.
My analysis indicates the company’s stock will be range-bound for a few months, and I now recommend Ulta Beauty as a Hold while cutting my price target. Ulta Feels the Competitive Heat, Demand Still Elusive Ulta Beauty demonstrated its slowest quarterly growth rate ever of 3.5% y/y in Q1 FY24, if one ignores the FY20 year of pandemic lockdowns.
That revenue growth rate meant Ulta Beauty grew its total sale.