What happened:
Shares of beauty, cosmetics and personal care retailer Ulta Beauty (NASDAQ:ULTA) rose 15.1% in morning trading after Warren Buffett’s Berkshire Hathaway disclosed a stake of 690,000 shares of Ulta valued at approximately $266 million in its 13-F filing for the second quarter of 2024. Given the legendary investor’s reputation for spotting high-quality opportunities in the stock market, the market will likely interpret the information positively for the company’s prospects in the near term.
Sentiment was also supported by Walmart’s significantly above-average earnings performance and sales outlook for the rest of the year, which suggested healthy spending habits among US consumers.
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What does the market tell us:
Ulta shares are not very volatile compared to the market average, having only experienced 4 swings of over 5% in the last year. Swings of this magnitude are very rare for Ulta and that suggests to us that this news had a significant impact on the market’s perception of the company.
The last major move we reported on was 22 days ago, when the company lost 6.1 percent after news broke that Piper Sandler analyst Korinne Wolfmeyer downgraded the stock from Overweight to Neutral and lowered the price target to $404 from $494, citing concerns about profitability due to “increased promotions and lower sales.”
The analyst added: “We expect a rather lackluster long-term plan to be in place in October (at the investor day) that could keep share prices range-bound.”
However, Wolfmeyer also clarified that “the downgrade is not a call to sell until the second quarter or the investor day in October, but rather an assessment that it may take longer than the next 12 months for the stock to recover.”
Ulta has fallen 24.7% year-to-date and is trading at $366.33 per share, 35.4% below its 52-week high of $567.18 set in March 2024. Investors who purchased $1,000 worth of Ulta stock 5 years ago would have an investment worth $1,143 today.
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