4 Reasons To Like Ulta Beauty, According To Oppenheimer

Oppenheimer's prior case against being aggressive on Ulta Beauty Inc ULTA stock was based on concerns of a slowdown in the beauty segment -- an assumption that no longer holds true.

The Analyst

Oppenheimer's Rupesh Parikh upgraded Ulta Beauty from Perform to Outperform with a price target lifted from $220 to $280.

The Thesis

The case for being aggressive on Ulta Beauty's stock can now be made for four reasons, which Parikh said should yield comps and underlying EPS growth over the years ahead.

• The company's management team deserves credit for implementing new initiatives on the merchandising front to stabilize comp trends and introduce a "meaningful amount" of innovation at stores.
• The U.S. beauty space is characterized as being on "more stable footing" with strength seen in the prestige segment.
• Ulta's stock is trading around 21.8x next 12 months P/E multiple, which is attractive given the analyst's model of a more than 20 percent EPS growth ahead.
• Parikh's first-hand checks and store visits on a nearly weekly basis consistently shows "high levels of newness" in both the prestige and mass beauty segments.

Price Action

Shares of Ulta Beauty were trading higher by 1 percent Tuesday at $249.63.

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