Ulta Beauty Earnings Preview–Can Strong Fundamentals Defy Bearish Options Signals?

Ulta Beauty (NASDAQ:ULTA) is America’s leading of prestige beauty products retailer. The company has one reportable segment, which includes retail stores, salon services, and e-commerce. Its products include makeup, skin care, tools and brushes, fragrance, and bath and body.

Their strong financial metrics, such as a 42.5% gross margin and a 55% return on equity, suggest effective management and operational efficiency. The focus on both physical stores and e-commerce allows them to cater to a diverse customer base.

The robust loyalty program, with 44.4 million active members, is a significant asset as it encourages repeat business and enhances customer engagement. The recent performance, including earnings per share of $5.14 surpassing analyst expectations, indicates positive growth and potential for investors.

Factors to Watch:

• Ulta's diverse product mix offering both mass and prestige beauty products, provides flexibility in varying economic conditions. Combined with strong loyalty program and strategic store locations could attract more high-value customers and drive sales growth in the lucrative prestige segment, allowing robust retention of customers.
• Consumer surveys indicate a preference for Ulta over Sephora for prestige beauty products.
• Continued investment in e-commerce capabilities and accelerated store growth plans could drive future expansion and market share gains.
• Intensified competition, especially from Sephora's expansion through Kohl’s (NYSE:KSS) and Amazon's (NASDAQ:AMZN) growing presence, could erode Ulta's market share, particularly in the high-margin prestige beauty category.
• Analysts project potential negative same-store sales growth in the near term due to competitive pressures, which could impact financial performance and stock valuation.

Analysts’ Price Targets:

• Oppenheimer maintained an 'outperform' rating on March 12, 2025, while lowering its price target from $515.00 to $435.00.
• Wells Fargo (NYSE:WFC) maintained an 'underweight' rating on February 05, 2025, while reducing the price target from $370.00 to $360.00.
• Morgan Stanley (NYSE:MS) upgraded from 'equalweight' to 'overweight' on January 21, 2025, raising their price target from $430.00 to $500.00.

Source: InvestingPro

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ULTA Q4 2024 earnings at 4:05 pm ET Thursday March 13, 2025

• 44 beats since Q 2012
• 5 Misses

Analyst Ratings:

Earnings Expectation:

Financial Health History

Financial Health for Palo Alto Networks is determined by ranking the company on over 100 factors against companies in the Consumer Discretionary sector and operating in Developed economic markets.

Source: InvestingPro

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Option Statistics:

Put/Call ratio suggests the following three scenarios:

• With Put/Call ratio between 0.8458 to 2.2104 for the next four upcoming expiries suggest that the overall option traders’ position is bearish more inclined to Puts.
• Lower earnings and guidance could trigger a sharp sell-off.
• Better than expected guidance would trigger a gradual rally.
• Overall market sentiments on the stock are bearish.

Technical Analysis Perspective:

• ULTA is forming a large complex top Head & Shoulder formation which points at bearish implications once initiated.
• The trigger point of the pattern is a strong breakdown below 315 and price continues drifting lower while 315/320 acts as a robust resistance.
• Earnings are a good catalyst for such a decline. Having said that pre/post earnings price volatility can distort the price action.
• A break below 315 followed by a weekly closing above the level may negate the pattern due to bearish bias by the option traders.

Weekly Candlestick Chart

ULTA Seasonality Chart:

• ULTA closes 3.9% higher in March, 72% of the time since 2007.

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Ali Merchant is a seasoned financial market professional with expertise in Technical Analysis, Treasury & Capital Markets, Trading, Sales, Research, Training, Fund & Relationship Management, Fintech, and Digitalization. He is a CMT charter holder and an active member of CMT Association, USA, American Association of Professional Technical Analysts, and CMT Association of Canada. He has worked on various roles and organizations in North America and the GCC, such as ABN Amro bank, Thomson Reuters, Refinitiv, MAK Allen & Day Capital Partners (WA:CPAP), and Bridge Information Systems.

He is the founder of TwT Learnings, provides financial market training. Follow us on “X” formerly Twitter “@twtlearning.”

Written By: Ali Merchant