The mid-term growth momentum is underestimated. Goldman Sachs Group, Inc. reaffirmed a "buy" rating on Ulta Beauty (ULTA.US).

Goldman Sachs Group, Inc. has released a report, reiterating a "buy" rating for the cosmetics retailer Ulta Beauty (ULTA.US), with a new target price of $642. The bank believes that the market has underestimated Ulta's growth potential and sustainability, and that its current momentum is expected to continue until 2026. By integrating analysis from trends in Alphabet Inc. Class C, HundredX, alternative data from Bloomberg and Placer, among other data sources, Goldman Sachs Group, Inc. has found that Ulta has shown positive momentum from the fourth quarter to date. Specifically, Alphabet Inc. Class C search volumes have been trending upwards this quarter; the Net Promoter Score (NPS) measuring customer satisfaction remains high year-on-year; and Bloomberg data, as well as offline foot traffic trends, are also positive. These high-frequency data points collectively confirm that their business has maintained strong performance in the recent period. The company believes that Ulta's acceleration in same-store sales is benefiting from the healthy development of the beauty industry and the company's strong execution capabilities. Investments in marketing, manpower, and services have translated into market share growth. Additionally, the beauty industry continues to remain robust. Consumer behavior analytics company Circana points out that the healthiest sector in the U.S. retail industry is beauty, with both revenue and sales volume growing, mainly driven by product innovation and the industry's transition towards social e-commerce. According to Circana's data, during Black Friday and Cyber Monday, demand for all retail categories fell short of expectations except for high-end beauty products (led by hair care, cosmetics, and perfumes). Therefore, Goldman Sachs Group, Inc. believes that Ulta's management guidance for a 4.4%-4.7% revenue growth in the 2025 fiscal year (with a midpoint of 3.0% growth in same-store sales in the fourth quarter) will prove to be conservative, as the business still has growth momentum remaining in the rest of the year. Entering 2026, Goldman Sachs Group, Inc. believes that the growth DRIVE from 2025 will continue, and the company will continue to benefit from a healthier industry environment and better execution capabilities. The bank believes that management is focusing on prioritizing controlling sales, general, and administrative expenses (SG&A) to further improve operating profit margins.