Ulta Beauty Tops Earnings Forecast, Boosts Outlook; Target Price $452 in Best Case

The Bolingbrook, Illinois-based makeup & cosmetic products retailer Ulta Beauty reported better-than-expected earnings in the first quarter and lifted its full-year 2021 outlook, sending its shares up over 5% on Friday.

The largest U.S. beauty retailer said its net sales increased 65.2% to $1.9 billion compared to $1.2 billion in the first quarter of fiscal 2020. The net sales increase during the first quarter of fiscal 2021 was primarily due to the favorable impact in the U.S. from improving consumer confidence, government stimulus payments and the easing of COVID-19 restrictions.

Ulta Beauty reported diluted earnings per share of $4.10, including a $0.03 benefit due to income tax accounting for share-based compensation, compared to diluted loss per share of $1.39 in the first quarter of fiscal 2020. Adjusted diluted loss per share for the first quarter of fiscal 2020 was $1.13.

That was way higher than the Wall Street consensus estimates of $1.99 per share.

For the fiscal year 2021, the company raised its net sales forecasts to $7.7 billion to $7.8 billion, up from the previous forecast of $7.2 billion to $7.3 billion. The diluted earnings per share projection were lifted in the range of $11.50 to $11.95, up compared to $8.85 to $9.30.

Ulta Beauty shares closed 5.17% higher at $345.36 on Friday. The stock rose over 20% so far this year.

Analyst Comments

“We are EW rated on Ulta Beauty (ULTA). We have been watching from the sidelines because we thought market expectations were far ahead of consensus, and to see meaningful upside to the stock required a peak multiple on what may be peak earnings. We were wrong; after Q1’21’s beat and raise, estimates are likely going higher, and we could see more upward revisions throughout the year. We think bulls are looking for $14.50/$16 in ’21/’22 EPS, which could mean a $400 stock or 16% upside from here (assuming a 25x multiple),” noted Simeon Gutman, equity analyst at Morgan Stanley.

“We struggle to underwrite bull case earnings because the comps required (40%/8.5% in ‘21/’22) assume: 1) all lost dollars from 2020 comeback, 2) core demographic-driven demand is stronger than usual, and 3) there is excess excitement/reopening-driven purchasing that resembles a stock-up behavior. Even if ULTA can achieve a 40% comp/$14.50 in EPS in ’21, at least some of the incremental growth above the guide is likely pulled out of ’22, making getting to $16 difficult. This keeps us EW rated.”

Ulta Beauty Stock Price Forecast

Twenty-five analysts who offered stock ratings for Ulta Beauty in the last three months forecast the average price in 12 months of $367.55 with a high forecast of $452.00 and a low forecast of $310.00.

The average price target represents a 6.43% increase from the last price of $345.36. Of those 25 analysts, 16 rated “Buy”, nine rated “Hold” while none rated “Sell”, according to Tipranks.

Morgan Stanley raised the stock price forecast to $350 from $330 with a high of $400 under a bull scenario and $225 under the worst-case scenario. The firm gave an “Equal-weight” rating on the beauty stores company’s stock.

Several other analysts have also updated their stock outlook. UBS raised the stock price forecast to $395 from $380. Stifel lifted the target price to $330 from $285. Telsey Advisory Group increased the price target to $400 from $375. Deutsche Bank upped the target price to $410 from $365. Citigroup raised the price target to $360 from $320.

Barclays lifted the target price to $452 from $361. Credit Suisse upped the target price to $390 from $350. JP Morgan raised the price target to $379 from $357. D.A. Davidson upped the target price to $376 from $361. Oppenheimer lifted the target price to $385 from $360. Piper Sandler increased the target price to $386 from $361.

“Like many others in the consumer cyclical sector, narrow-moat Ulta Beauty crushed all sales and earnings expectations in 2021’s first quarter as pent-up demand and government stimulus encouraged strong spending. However, we anticipate some of these factors will fade as the year progresses, and Ulta’s full-year guidance suggests as much, as its implied sales for the next three quarters are in line with our prior view,” noted David Swartz, equity analyst at Morningstar.

“Regardless, we expect to raise our per share fair value estimate of $228 by a high-single-digit percentage on the first-quarter outperformance, though we view Ulta’s shares (trading at about 30 times projected 2021 EPS of just under $12) as overvalued.”

Check out FX Empire’s earnings calendar