William Blair analyst Dylan Carden has maintained their neutral stance on ULTA stock, giving a Hold rating on August 25.
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Dylan Carden has given his Hold rating due to a combination of factors influencing Ulta Beauty’s current financial outlook. The company showed strong performance in the second quarter with better-than-expected comparable sales and improved gross margins. However, there are concerns about the sustainability of these results, as operating margins have declined compared to the previous year, indicating potential risks in the company’s financial model.
Despite positive sales momentum across all categories and channels, Ulta Beauty faces challenges such as expected deleverage on fixed costs and increased investment spending. The company’s guidance for operating margins in the latter half of the year is below its full-year target, suggesting potential deceleration. Additionally, while the valuation remains high at 20 times forward earnings, there are concerns about the impact of online migration on retail channels and the complexity of maintaining growth. These factors contribute to the Hold rating, reflecting a cautious outlook on the company’s ability to achieve its long-term margin targets.
In another report released on August 25, Jefferies also maintained a Hold rating on the stock with a $550.00 price target.