Ulta Stock Outperforming: Analyst Raises Price Target on Earnings Optimism

Ulta Beauty (NASDAQ: ULTA) is drawing increased market attention following a series of analyst updates, the latest of which from Citi came along with a big price target raise. The core narrative on the street at present revolves around expectations of a robust Q2 earnings report next week, driven by improved comparable sales and enhanced operational execution.

Citigroup analyst Kelly Crago increased the firm's price target to $550 from $450, while maintaining a Neutral rating. This adjustment is predicated on the expectation of an earnings beat in the second quarter next week (28th August), with stronger comps and better overall execution within the company.

However, the analyst also cautioned about a balanced risk/reward scenario, acknowledging that market expectations are already elevated. Prior to this latest revision, Crago had already raised the price target from $365 to $425 in May, also maintaining a Neutral rating at that time. This progressive upward revision underscores a growing confidence in Ulta's underlying performance amid a dynamic beauty and retail environment.

Ulta's stock has been enjoying a solid run this year, adding 20.44% YTD, and outperforming the major indices along the way. Whilst the average expectations for EPS in the upcoming quarter are for a Y/Y decline ($4.99 vs $5.30), revenue is expected to have grown 4.2% to $2.66B.

Adding to the positive sentiment, Goldman Sachs upgraded Ulta Beauty from Neutral to Buy, setting a price target of $423. Goldman Sachs expressed a sentiment that the concerns surrounding growth in both prestige and mass beauty sectors had likely reached their lowest point, suggesting a more optimistic outlook for Ulta's future performance.

The key now will be whether Ulta can deliver on these expectations and justify the elevated market sentiment reflected in the increased price targets.