Ulta Beauty got a fresh Wall Street warning on the eve of its next earnings report, as an analyst cut a price target on the NASDAQ-listed retailer ahead of next Tuesday’s results after the close. Jim Cramer called the move jarring, especially with Ulta stock already down 15% this year.
Cramer brought up the company on Mad Money’s latest game plan for the week, pointing out that the stock had been beaten down even before the new call landed. He said Ulta Beauty, Inc. had only just been through a mixed quarter about a week and a half ago, and that the sell-off intensified after that report.
The earlier quarter gave investors both sides of the Ulta story. Cramer said same-store sales were strong, but higher-than-expected costs turned the release into a legitimate earnings miss. The next day, he said, the shares fell 14%, and by March 23 the stock was down almost 28% from its February all-time highs.
That backdrop helps explain why the new price target cut landed with such force. Ulta Beauty is not a sleepy name. It sells cosmetics, skincare, haircare and fragrance, and it also runs in-store beauty services that include hair, makeup, brow and skin treatments. When a company like that is heading into earnings, every new Wall Street note can move expectations before management says a word.
Cramer did not hide his own view. He said Ulta was long his favorite cosmetics retailer and called it a very good price. He also said he was surprised that higher-price merchandise near the front of the stores was selling well and that gross margins held up, which is why the analyst downgrade felt out of step with the way he was reading the business.
That is the friction now: a stock that has already taken a hard hit, a bullish read from Cramer, and a cut to the target just days before the company is due back with another quarter. The market will not have long to wait. Ulta Beauty is scheduled to report next Tuesday after the close, and the new analyst call ensures investors will go into that update with lower expectations than they had at the start of the week.
Elsewhere in beauty retail, Estee Lauder confirmed it is in discussions to combine with Spanish cosmetics company Puig, and its stock fell 7.7%. But for traders watching Ulta, the immediate question is simpler: whether the company can show enough strength in its next report to justify buying the stock after another steep year-to-date slide.
