Oppenheimer analyst Rupesh Parikh reiterated an Outperform rating on the shares of Ulta Beauty Inc ULTA with a price target of $540.
The company is expected to report its second-quarter FY23 earnings on August 24.
Based on the review of recent data points, the analyst still sees a healthy beauty backdrop with continued strength in the mass category.
According to the analyst, headwinds remain in the hair category for ULTA, with a difficult Olaplex lap and still challenged hair tools, which could limit the magnitude of comp upside.
For Q2, consensus estimates for a comp increase of 6.3% and EPS of $5.83 appears achievable. The analyst believes the backdrop is slightly more promotional Y/Y.
ULTA shares trade more consistent with historical trough levels at 17.4x NTM consensus estimates. The current level is an attractive entry point for the longer-term players.
The analyst will continue to monitor student loan impacts on the beauty category, a likely increased promotional intensity Y/Y, and prestige brand additions on Amazon.com Inc AMZN, with L'Oreal Co LRLCY moving more aggressively on the platform.
On the guidance front, the analyst expects ULTA to maintain the FY23 guide, even with any potential Q2 upside, amidst a more uncertain 2H with the pending student loans restart and the typical conservative nature of the management team.
Price Action: ULTA shares are trading lower by 4.03% at $429.88 on the last check Tuesday.
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