ULTA shares target raised to $565 by Stifel on solid F4Q23 results

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ULTA shares target raised to $565 by Stifel on solid F4Q23 results
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On Friday, Stifel, a financial services firm, adjusted its share price target for ULTA Salon (NASDAQ: ULTA), increasing it to $565 from the previous $505, while maintaining a Hold rating on the stock. This change comes after ULTA Salon reported robust financial results for the fourth fiscal quarter of 2023.

ULTA Salon's earnings before interest and taxes (EBIT) for the fourth quarter stood at $517 million, surpassing the consensus estimate of $484 million. This performance was supported by a 2.5% growth in comparable store sales, which exceeded the anticipated 2.2%. Moreover, the company experienced a slight gross margin increase to 37.7%, compared to the expected 37.3%.

The company's initial guidance for the fiscal year 2024 includes comparable store sales growth projections of 4% to 5%, slightly above the consensus forecast of 3.4%. The projected earnings per share (EPS) range is $26.20 to $27.00, aligning closely with the consensus estimate of $27.03. These figures were consistent with preliminary insights shared during the third fiscal quarter earnings call.

ULTA Salon anticipates that the U.S. beauty category growth will decelerate to mid-single-digits in fiscal year 2024. However, the company's projected comparable store sales growth suggests it will maintain its market share.

This outlook may incorporate a degree of caution and acknowledges the competitive landscape, including wider distribution of certain prestige brands that could lead to a modest uptick in promotional activities.

Stifel has slightly increased its estimates for ULTA Salon's fiscal years 2024 and 2025, leading to the revised price target of $565, which is based on 12 times the projected EBITDA for fiscal year 2025.

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