What Happened?
Shares of beauty, cosmetics, and personal care retailer Ulta Beauty (NASDAQ:ULTA) jumped 7.1% in the afternoon session after peer, Bath & Body Works, reported strong third-quarter financial results. BBWI outperformed analysts' expectations for sales and earnings, and its guidance for the next quarter also surpassed consensus estimates. This positive outlook suggests sustained consumer demand as the holiday shopping season approaches. These trends may also signal strong demand for similar offerings from industry peers like ULTA. Separately, TD Cowen analyst upgraded SBH, another peer of ULTA, reflecting increasing optimism among Wall Street analysts toward key players in the beauty and cosmetics segment.
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What The Market Is Telling Us
Ulta’s shares are not very volatile and have only had 5 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful, although it might not be something that would fundamentally change its perception of the business.
The biggest move we wrote about over the last year was 3 months ago when the stock gained 15.1% on the news that Warren Buffett's Berkshire Hathaway revealed a stake of 690K shares of Ulta valued at ~$266 million in its Q2 2024 13-F filing. Given the legendary investor's reputation for identifying quality opportunities in the stock market, the market read the information positively for the company's near term prospects. The sentiment was also supported by Walmart's strong earnings outperformance and sales outlook for the rest of the year, which indicated a healthy spending pattern for the U.S. consumer.
Ulta is down 25.7% since the beginning of the year, and at $361.63 per share, it is trading 36.2% below its 52-week high of $567.18 from March 2024. Investors who bought $1,000 worth of Ulta’s shares 5 years ago would now be looking at an investment worth $1,564.
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