It's been a tough past few months for Ulta Beauty ( ULTA -1.69% ) and, by extension, for shareholders. Although the stock started the year out on a bullish foot, it has fallen steeply from its March peak thanks to a combination of competition and continued inflation.
Namely, after sales growth slowed to a crawl in the fiscal 2024 first quarter (ended May 4), the cosmetics and skincare retailer lowered its full-year revenue guidance. Investors are understandably worried. The sellers, however, have arguably overshot their target.
At the same time, the narrative surrounding the company has also turned unnecessarily pessimistic. Analysts' current consensus price target of $487.90 is 28% above the stock's present price, suggesting its pullback is ultimately a buying opportunity.
Investors just have to look further down the road to see the bigger picture. Three arguments for owning Ulta Beauty stock While there are still challenges for Ulta to overcome, the growth headwinds the company presently faces are temporary. Inflation is a big one.
While May's inflation rate of 3.3% was above the Federal Reserve's long-term target of 2%, it came in slightly lower than expected. The Federal Reserve now has plans for a single rate cut this year, which will start to give consumers some relief.
On the competition side, Sephora is Ulta's main rival, according to Jefferies . The firm downgraded Ulta in April, citing its competitor's stepped-up sales efforts. Ulta CEO Dave Kimbell also acknowledge.
