Stock Story -
What Happened: Shares of beauty, cosmetics, and personal care retailer Ulta Beauty (NASDAQ:ULTA) fell 6.1% in the afternoon session after Piper Sandler analyst Korinne Wolfmeyer downgraded the stock's rating from Overweight to Neutral and lowered the price target from $494 to $404, citing profitability concerns due to "increased promotions and slower sales." The analyst added, "We believe a rather lackluster long range plan come October [investor day] is probable, which could leave shares range-bound."
However, Wolfmeyer also clarified that "the downgrade is not a call to sell into the FQ2 print or the October investor day, but a view that it might take beyond the next 12 months to get share re-ignited."
The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks. Is now the time to buy Ulta? Find out by reading the original article on StockStory, it's free.
What is the market telling us: Ulta's shares are not very volatile than the market average and over the last year have had only 3 moves greater than 5%. In context of that, today's move is indicating the market considers this news meaningful, although it might not be something that would fundamentally change its perception of the business.
The biggest move we wrote about over the last year was 4 months ago, when the stock dropped 14.6% on the news that the company warned about cooling demand for beauty products at a J.P. Morgan conference. CEO Dave Kimbell added "We have seen a slowdown in the total category...We came into the year — and we talked about this on our [earnings] call a few weeks ago — expecting the category to moderate. It has [had], as I said, several years of strong growth. We did not anticipate it would continue at the rate that it's been growing."
Ulta Beauty also expects comparable sales for the first quarter of the year to come in at the lower end of the first-half guidance for low single-digit growth provided during the Q4'2023 earnings call. Given the healthy growth reported in recent quarters, management anticipated some moderation heading into 2024.
Ulta is down 24.5% since the beginning of the year, and at $367.49 per share it is trading 35.2% below its 52-week high of $567.18 from March 2024. Investors who bought $1,000 worth of Ulta's shares 5 years ago would now be looking at an investment worth $1,041.
