Ulta Salon, Cosmetics & Fragrances, Inc. (NASDAQ: ULTA) – Analysts: Drastic recommendations of the second half of Ulta Beauty carve out a spot for the retailer

Ulta Beauty Inc Shares (NASDAQ: ULTA) fell Friday to their lowest level in eight months in reaction to the retailer's second quarter results, which revealed revenue and earnings losses as well as a lower forecast for the company. ;year.

Analysts

Erin Murphy, an analyst at Piper Jaffray, brought Ulta from the overweight to neutrality and lowered the target price from $ 360 to $ 250.

Credit Suisse analyst Michael Binetti maintained the Outperform rating and lowered the price target from $ 380 to $ 286.

Muted visibility keeps Piper Jaffray on the sidelines

This is not the second quarter that is causing concern, but rather what is involved for the second half, which could spill over into the first half of next year, Murphy said in a note from Thursday.

Forecasts have been revised below the long-term objective and, contrary to the 20% long-term EPS growth objective, the second half forecast imply EPS growth of less than one year. figure, said the analyst.

The cosmetics category, accounting for more than 50% of sales, showed volatility in July, with cumulative downward trends also remaining, Murphy said, citing Ulta.

The 0.8% growth in the number of notes was the lowest in seven years, but transactions grew 5.4%, supporting a 6.2% increase in the number of tickets, Murphy said.

The analyst attributed the weak growth in the number of tickers down the number of units per transaction and the rise in promotions activity.

"… The continued deceleration of color cosmetics could further moderate loyalty," she adds during the 2H, which would hurt the comp. "

Piper Jaffray has significantly reduced his estimates for the third and subsequent quarters.

"While management continues to focus on the introduction of several new brands in stores, which has paid off, we prefer to stay behind during this period of reduced visibility," said the analyst. .

Credit Suisse: Uncontrollable Guidance

The reason why Ulta so sharply lowered the forecast for the second half after what looked like a very short-term change in the trend line is unclear, Binetti said in a note on Thursday.

This is particularly surprising, as the company sailed and managed to develop for two years in very gloomy and prestigious cosmetic trends, said the analyst.

Credit Suisse lowered its 2019 EPS target from US $ 13.08 to US $ 12 and forecast third quarter EPS of US $ 2.15, based on a 3.3% comp. growth and expansion of 10 basis points of gross margin.

Binetti said it expects a slight acceleration in composition growth and gross margin in the fourth quarter, while accelerating the innovation launch process.

"While we are concerned that ULTA may provide a re-acceleration of the SQ 4Q, we believe that our multi-year EPS update already incorporates much more conservative trends for the category."

The action price

Ulta shares were down 29.33% to $ 238.49 at the time of publication Friday, their lowest level since December 27, 2018.

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