Shares of Ulta Beauty ( ULTA ) fell on Friday after the largest U.S. cosmetics retailer missed profit estimates for its fiscal Q4 and issued muted guidance for the full year. The subsequent decline in earnings pushed the ULTA Relative Strength Index (14-day) into the low-20s, indicating oversold conditions that often precede a support rally.
Following the latest decline, Ulta Beauty stock is down more than 20% from its year-to-date high.
Much of ULTA’s bottom line weakness in the fourth quarter was due to a 23% increase in SG&A expenses as the company continues to modernize its supply chain. Ulta Beauty is a front-loading investment in automated dispensing to reduce long-term labor costs.
Additionally, management is investing heavily in virtual try-on tech and tech tech shop integration as part of its broader Ulta Beauty Unleashed strategy.
Over time, these initiatives are expected to improve efficiency and improve margin expansion, which makes ULTA shares worth owning after today’s earnings dilution.
Ulta Beauty’s shares are also attractive at the current, discounted valuation because the company’s mass brands (NYX, L’Oreal, elf) position it well for economic softening in 2026.
In addition, Ulta Beauty Rewards currently has approximately 45 million active members who drive approximately 95% of all sales – a loyalty moat that most competitors cannot match.
It’s also worth noting that ULTA has stock options worth about $1.8 billion this year, which makes it very attractive as a long-term investment.
Despite recent declines, options traders are bullish on Ulta Beauty. Contracts that expire in mid-June have set a high of around $644, indicating a potential upside of nearly 20% from here.
Wall Street analysts seem to share options traders’ optimism about ULTA stock, especially since it has a history of closing both March and April with significant gains.
According to Barchart, the consensus rating on Ulta Beauty Inc. remains at “Moderate Buy,” with an average target of about $712, indicating a potential upside of about 30% from here.
