Don't Buy ULTA (ULTA) Before Results and Guidance on Dec 3rd - Piper

Despite being favorable on ULTA Salon (NASDAQ: ULTA), Piper Jaffray analyst, Stephanie Wissink, is unsure that guidance will meet lofty expectations and suggests investors hold off from buying ahead of the call on December 3rd. Instead, use pullbacks to buy because the long term outlook for $10 per share in EPS would make the stock attractive.

ULTA shares are likely to be volatile surrounding the Q3 report on Dec 3. As with the last several quarters, comp expectations are at the upper end of the guided 8%-10% range.

With retail traffic increasingly inconsistent and some concerns around intensifying competition in gift giving categories, she is more cautious on the potential stock reaction to Q4 guidance. On both a sequential and Y/Y basis, she expect the outlook to call for comp rate moderation.

Any stock pullback would provide a favorable entry point for 2016 and beyond where secondary drivers of the model become more important to profit rate expansion. Large format store growth and MSD or better annual comp sales rates are the foundation for the growth model. They are also intrigued by sales and leverage potential from secondary drivers including e-com, small format & small market stores, and monetization of the CRM program.

Looking out to 2020, they see at least $10 of EPS power, with near $3 from secondary drivers.

No change to $170 PT or Overweight rating.

For an analyst ratings summary and ratings history on ULTA Salon click here. For more ratings news on ULTA Salon click here.

Shares of ULTA Salon closed at $170.51 yesterday.

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