Goldman Sachs issued a report reiterating a "Buy" rating on cosmetics retailer Ulta Beauty (ULTA.US), with a new price target of $642. The firm believes the market is underestimating Ulta's growth potential and sustainability, with its current momentum expected to persist through 2026. By integrating and analyzing multiple data sources, including Google Trends, HundredX, Bloomberg alternative data, and Placer, Goldman Sachs found that Ulta has demonstrated positive trends from the fourth quarter to date. Specific manifestations include: Google search volume showing an upward trend this quarter; the Net Promoter Score (NPS) for measuring customer satisfaction remaining high year-over-year; and both Bloomberg data and offline foot traffic trends also being positive. These high-frequency data points collectively confirm that its business has maintained strong performance recently. The firm believes Ulta's comparable store sales acceleration benefits from the healthy development of the beauty industry and the company's strong execution. The company's investments in marketing, labor, and services have translated into market share gains. Furthermore, the beauty industry remains robust. Consumer behavior analytics company Circana pointed out that the healthiest sector in US retail is beauty, with both value and volume growing, primarily driven by product innovation and the industry's shift towards social commerce. According to Circana's data, during Black Friday and Cyber Monday, demand across all retail categories fell short of expectations except for prestige beauty, which was led by hair care, color cosmetics, and fragrance. Consequently, Goldman Sachs believes Ulta management's guidance for fiscal year 2025 revenue growth of 4.4%-4.7% (with a median Q4 comparable sales growth of 3.0%) will prove conservative, as the business maintains growth momentum for the remainder of the year. Looking ahead to 2026, Goldman Sachs expects the growth drivers from 2025 to persist, with the company continuing to benefit from a healthier industry environment and improved execution. The firm believes management is focused on prioritizing control over Selling, General & Administrative (SG&A) expenses to further enhance operating margins.
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