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JP Morgan's Christopher Horvers raised their price target on Ulta Beauty (NASDAQ: ULTA) by 5.9% from $505 to $535 on 2023/12/01. The analyst maintained their Strong Buy rating on the stock.

Post the 2023/11/30 release of Ulta Beauty's Q3 2023 earnings report, Horvers argued that the "burden of proof shifts to bears" because management increases its revenue and margin guidance.

The analyst added that, in their view, "Ulta Beauty is a winner in a good category where vendors need it and the stock should trade at least in line with the market."

Earnings Report

For Q3 2023, Ulta Beauty reported:

• EPS of $5.07, which beat the Zacks Consensus Estimate of $4.96 but missed, by 5.1%, Q3 2022's $5.34.
• Revenue of $2.49B, which beat the Zacks Consensus Estimate of $2.47B and Q3 2022's $2.34B by 6.4%.
• Comparable sales (sales for stores open at least 14 months and e-commerce sales) were up 4.5%, ahead of the 2.5% consensus estimate.
• Operating income of $327.2M, down 9.6% from Q3 2022's $361.9M.
• Operating margin of 13.1%, down 240 bps from Q3 2022.
• 12 new stores opened, ending the quarter with 1,374.
• The repurchase of 686,689 shares for $281.5M in the quarter.

For FY 2023, management guided:

• Revenue of $11.1B to $11.15B, up from the $11.05B to $11.15 previously guided and compared to FY 2022's $10.2B.
• EPS of $25.20 to $25.60, up from the $25.10 to $25.60 previously guided and compared to FY 2022's $24.01.
• Operating margin of 14.6% to 14.8% (unchanged).
• A total of 25 to 30 net new store openings.
• Capex of $400M to $425M.

CEO Dave Kimbell commented: “Q3 represented another strong performance by the Ulta Beauty team, as sales, gross profit, and diluted EPS all exceeded our internal expectations.

"Our traffic trends remained healthy, our brand awareness increased, and we expanded our loyalty program to a record 42.2 million members.

“As we look to the future, the outlook for the Beauty category is bright, and I am confident Ulta Beauty has the right plans in place to delight our guests this holiday season, expand our leadership position in specialty beauty retail, and deliver long-term shareholder growth.”