01.01.22
Makeup mavens are fed-up with the pandemic—that's good news for Ulta Beauty. Driven by pent-up consumer demand for cosmetics, financial analysts expect the beauty retailer to benefit most. Analysts increased the price target to $500 a share from $445, and reiterated a Buy rating. Shares rose more than 40% in 2021.
“As we get closer to the end of the pandemic, we expect people to attend more social activities, which should help turn around the makeup category,” DA Davidson lead analyst Michael Baker wrote in a research note.
Ulta boosted its 2021 sales outlook earlier this month, saying it expects sales of $8.5 billion to $8.6 billion, and comparable-store sales to grow 36% to 37%. It had previously forecast $8.1 billion in sales.
Cosmetics represented roughly 50% of Ulta’s sales before the pandemic, but dropped to 44% in 2020, as Covid-19 halted social functions and consumers shifted their spending on makeup to skin care and other beauty categories, he wrote.
“One of the reasons we like Ulta is that makeup, their biggest category, has not yet fully recovered to 2019 levels,” Baker said. “But, we do believe makeup trends are moving in the right direction, helped by increased newness.”
Compared with the second quarter of 2019, the skin care sector overall increased in the double-digits in 2021, Baker wrote. He projects makeup sales will recover while demand for skin care continues.
Cowen also rated the stock a Buy, citing overall growth for the beauty business.
Ulta boosted its 2021 sales outlook earlier this month, saying it expects sales of $8.5 billion to $8.6 billion, and comparable-store sales to grow 36% to 37%. It had previously forecast $8.1 billion in sales.
Cosmetics represented roughly 50% of Ulta’s sales before the pandemic, but dropped to 44% in 2020, as Covid-19 halted social functions and consumers shifted their spending on makeup to skin care and other beauty categories, he wrote.
“One of the reasons we like Ulta is that makeup, their biggest category, has not yet fully recovered to 2019 levels,” Baker said. “But, we do believe makeup trends are moving in the right direction, helped by increased newness.”
Compared with the second quarter of 2019, the skin care sector overall increased in the double-digits in 2021, Baker wrote. He projects makeup sales will recover while demand for skin care continues.
Cowen also rated the stock a Buy, citing overall growth for the beauty business.