Bank of America upgraded Ulta Beauty (ULTA) to ‘Buy’ with a $685 price target, anticipating a 32% upside. The firm believes Ulta’s recent investments are building a strong growth ‘flywheel’ and the recent stock pullback presents an attractive entry point.
Analysts expect these investments to improve customer economics, lower costs, and drive operating income growth in the coming years.
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Ulta Beauty Stock Upgrade: Bank of America Sees 32% Upside as Investments Fuel Growth
Ulta Beauty's (ULTA) stock is gaining traction after a recent pullback, with Bank of America upgrading the retailer to 'Buy' from 'Neutral'. The firm set a $685 price target, indicating a potential 32% increase from Monday's closing price. Shares were up nearly 3% ahead of Tuesday's open.
Analyst Lorraine Hutchinson believes Ulta is strategically using its recent investments to build a sustainable growth engine, rather than simply maintaining its current position. She noted that the recent stock decline has brought down investor expectations, creating a favorable opportunity to invest in a high-quality company at a discounted valuation compared to its peers.
Over the past three months, Ulta's stock has fallen nearly 24%, accelerating after the company announced over $434 million in investments for fiscal 2025. These investments are focused on new store openings, remodeling existing locations, improving IT systems, expanding its Wellness by Ulta retail space, and growing its international presence.
Despite concerns about Ulta's spending, Hutchinson anticipates these initiatives will lower future costs, improve customer economics, and unlock new growth opportunities. She expects the company to achieve low-double-digit operating income growth in fiscal 2026 and beyond, with potential for multiple expansion as SG&A discipline improves and free cash flow strengthens.
The Bank of America upgrade aligns with broader analyst sentiment. Out of 28 analysts covering Ulta, 19 currently have a 'Buy' or 'Strong Buy' rating, according to LSEG data.
