Thursday, January 26, 2017

Ulta: Love The Story, Need A Pullback

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*Ulta continues to have multiple drivers to their business. In fact the number of drivers seem to be expanding.

*In this environment double digit comps are a rare find.

*With that all said we'd need a pullback to buy.

On December 1st, 2015 we put a $205 6-12 month target on Ulta (NASDAQ:ULTA) when the stock was $167 (behind PRO paywall). The story may even be better than it was then. That said, based on our earnings expectations over the next twelve months, we'd need a pullback to buy.
Brief Company Background
Ulta is the biggest chain of beauty retailers in the US. The market cap is $17B and earnings have been growing at 25%. The company has over 900 locations. Store growth is running at about 10%. They carry all the top beauty brands as well as many niche brands making them a main beauty destination.
Low-Hanging Fruit
If we told you about some of the things Ulta is embarking on without telling you the company name you'd say 'makes sense for a start up just figuring things out.'
We call that "low-hanging fruit." Low hanging fruit is a term associated with easy drivers to boost sales and earnings. A company doing this well typically used up all their great easy ideas. Ulta is only just getting started.
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