Growth stock Ulta Beauty has been sending some bullish signs as it joins the IBD 50 list of growth stocks after upbeat earnings.
After breaking out of a cup base with a 451.40 buy point, the beauty products stock traded in a three-week-tight pattern, in which shares closed within 1.5% of the previous week's close for two continuous weeks. The pattern shows strength for a next move up. However, the developing market correction could undermine gains in growth stocks.
ULTA shares tested their 50-day line on Monday, amid the larger market sell-off, and are just below the all-time-high hit in February.
Growth Stock Boasts Strong Fundamental and Technical Ratings
Ulta holds outstanding fundamental and technical rankings, including 96 Composite and 93 Relative Strength Ratings.
The Illinois beauty products company and Nasdaq-100 component has an unbroken record of sales and earnings growth over the past seven quarters, earning an impressive 93 EPS Rating.
Fourth quarter sales for this growth stock rose 18% year over year to $3.2 billion, above FactSet views of 13.2% to 15.6%. Sales grew for all three segments: retail, salon and e-commerce. Earnings rose 24% year over year to $6.66 per share.
Analysts polled by FactSet estimate sales of $2.6 billion in the first quarter of 2023 on a profit of $6.71 per share. For the fiscal year ending in January 2023, Ulta is expected to top the $10 billion sales mark, compared to $8.6 billion in 2022.
The global cosmetics market is set to grow to $463 billion by 2027, according to Allied Market Research estimates. The retailer offers cosmetics, fragrances, skin and hair care products. It also sells bath and body products, professional hair products and provides salon services. Its private label products include branded Ulta products, such as the Ulta Beauty Collection.
The company plans to open 25 to 30 new stores in 2023, according to reports. In February 2022, Target announced plans to expand its partnership with Ulta to 800 stores.
The growth stock ranks first in the Retail-Specialty group, which at No. 77 is in the top half of IBD's 197 industry groups.
Bullish Analyst Ratings
FactSet analysts are overweight with a price target of 560.67. Several other analysts are bullish on the stock as well.
Raymond James' Olivia Tong maintained a strong buy rating with a price target of 600 after Ulta's earnings beat. Simeon Siegel at BMO Capital Markets raised his price target to 510, maintaining a market perform rating. Michael Binetti at Credit Suisse raised the price target to 580.
Mutual funds own 52% of the growth stock. In fact, more funds have been picking up the stock over the past eight quarters.
Exchange traded funds hold the stock as well. The Consumer Discretionary Select Sector SPDR Fund and iShares Russell Mid-Cap Growth ETF hold shares of Ulta.
Please follow VRamakrishnan on Twitter for more news and analysis of stocks.
