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Key Takeaways
- Ulta Beauty shares sank Friday as Jefferies lowered its rating and price target on concerns about increased competition and an aging product lineup.
- Jefferies dropped Ulta Beauty’s rating to “hold” from “buy,” and slashed the stock’s price target by one-quarter to $438.
- Jefferies analysts said “we have viewed Ulta as a share taker in current macro, but see constraints on ULTA’s prestige biz (50% sales) due to lack of newness and increasing pressure from Sephora.”
Shares of beauty products retailer Ulta Beauty (ULTA) fell close to 3% Friday as Jefferies downgraded the stock, citing concerns about increased competition and an aging product lineup.
Jefferies cut its rating on the stock to “hold” from “buy,” and slashed the price target to $438 from $585.
Jefferies analysts wrote “we have viewed Ulta as a share taker in current macro, but see constraints on ULTA’s prestige biz (50% sales) due to lack of newness and increasing pressure from Sephora.”
They noted that prestige cosmetics and hair care products are key, high-margin categories for Ulta Beauty, and that the company has lost market share in those. In addition, efforts to strengthen Ulta’s brand mix “have been misdirected toward small unproven brands, while competition (Sephora) has been relentlessly adding zeitgeist emerging brands, some of which are exclusives.”
The analysts added “we were hopeful that Charlotte Tilbury and Sol de Janeiro would breathe life into ULTA’s business, but initial checks don’t show any major improvement.”
Ulta Beauty shares finished 2.7% lower at $413.50 Friday. They traded near their all-time high last month, but have steadily declined and are in negative territory for 2024.
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