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Goldman Sachs upgraded Ulta Beauty (ULTA, Financials) to "Buy" from "Neutral" on Tuesday, citing signs of stabilization in the beauty industry. The investment bank also raised its price target on the stock from $384 to $423.
The company hasn't taken a side on Ulta Beauty since December 2022 because it was worried about a slowdown in sales in the industry and possible loss of market share in the premium beauty section. The worries have now been eased, according to analysts, as the sector shows signs of getting better.Based on data from Circana, Goldman Sachs thinks that the luxury beauty market will grow by 7% and the general beauty market will grow by 3% in 2024. On top of that, analysts think Ulta Beauty will have good comparable store sales for the first quarter and the whole fiscal year of 2025. Recent trends that are in line with the company's projections show that sales are picking up speed.Digital participation has also grown. Every month, more people are using Ulta now than in November 2024, and app downloads went up 9% year-over-year in February. There has also been a huge rise in online searches linked to its "21 Days of Beauty" promotion, which shows that people are more interested.Analysts at Goldman Sachs said that competition from Sephora doesn't seem to be as much of a problem because Ulta's recent product launches have made the company do better. They also said Ulta's fiscal 2025 forecast might be too low because the company has a history of beating expectations for selling, general, and administrative growth.
This article first appeared on GuruFocus.