ULTA stock downgraded by Piper Sandler amid margin concerns By Investing.com

On Wednesday, ULTA Salon (NASDAQ: ULTA) experienced a change in stock rating as Piper Sandler shifted its view from Overweight to Neutral. Accompanying this downgrade, the firm also adjusted ULTA’s price target, reducing it to $404 from the previous figure of $494.

The revision comes after an in-depth review of ULTA’s competitive position and promotional dynamics. The analysis also considered potential outcomes from the company’s investor day scheduled for October.

Despite ULTA’s efforts to enhance supply chain efficiencies, which Piper Sandler had previously seen in a positive light, the firm now anticipates that these improvements may not sufficiently counterbalance various sources of margin pressure.

Piper Sandler expressed concerns that ULTA’s management is increasingly reliant on measures to drive customer traffic. However, these measures might not be adequate to address the margin dilution stemming from several fronts.

Consequently, the firm anticipates a potentially uninspiring long-term plan to be revealed in October, which could result in the stock’s performance being constrained within a certain range.

The firm clarified that this new stance is not a recommendation to sell ULTA shares ahead of the second fiscal quarter earnings report or the October investor day. Instead, it suggests that a resurgence in the stock’s value could likely take longer than the next 12 months. Piper Sandler’s outlook is based on the company’s current understanding of strategic maneuvers and the broader competitive landscape in which ULTA operates.

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