ULTA Salon (ULTA) Buy Reiterated at Goldman; Analyst Comments on Sell-Off

Goldman Sachs reiterated a Buy rating on ULTA Salon (NASDAQ: ULTA) with a price target of $118.00. Analyst Matthew J. Fassler commented on the recent sell-off.

"The recent sell-off in growth stocks has been so pervasive that it feels naïve and futile to revisit individual stories on their investment merits. Doing so for a retail growth stock is more fraught still, given choppy consumer spending in recent months. Even so, we reiterate our Buy rating on ULTA," said Fassler.

"Our composite of 20 retail and restaurant unit growers currently trades at its lowest average relative P/E ratio since at least November 2010, at 157%, vs. a prior range of 165%-230%. ULTA’s PEG ratio now stands below the median of growth peers despite better growth and ROC metrics," he added. "ULTA's ongoing sell-off, in our view, appears to stem in part from questions about the impact of UNICAP accounting on gross margin going forward. This convention, involving the capitalizing of costs when inventory is purchased and the expensing of same costs when the inventory is sold, can aid margins when inventory increases at a faster rate than sales, and penalize margin when inventory is depleted. If UNICAP were a threat, we believe it would have been manifested by 3Q13, when the inventory trend began to track closer to sales trends."

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 $87.79 yesterday.

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