Oppenheimer analyst Rupesh Parikh reiterated an Outperform rating on the shares of Ulta Beauty Inc
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
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.
