JPMorgan Adds Ulta Beauty (ULTA) to its Focus List After Pullback, Removes Target (TGT) Given Near-term Concerns on SSS Forecasts

January 14, 2022 10:26 AM EST
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Price: $354.62 +0.53%

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JPMorgan analyst Christopher Horvers added Ulta Beauty (NYSE: ULTA) to the JPM Analyst Focus List after shares pulled back roughly 10% since the beginning of the year.

“We believe the near-term setup favors names with high visibility to positive comps in 1Q (i.e., all of autoparts, ULTA) or where sentiment/positioning has washed out against expected upside and valuation (i.e., ASO). More broadly, we’d highlight OW-rated DRVN, ULTA, and GPC (with the first two our only Analyst Focus List stocks now) as names that are the purest 2022 re-opening stories,” Horvers said in a client note.

On the other hand, the analyst removed Overweight-rated Target (NYSE: TGT) from JPM’s Analyst Focus List given near-term concerns on SSS forecasts.

Still, he remains OW on a “still solid consumer, sustained share gains, share repurchase support, crowded short positioning, and considering TGT is the first of our large caps to enter the flattening revision cycle (started in 2Q21) and will be one of the first to come out as other stocks follow.”

Also, Horvers upgraded O’Reilly Automotive (NASDAQ: ORLY) to Overweight from Neutral “given our view of sustained demand, low margin giveback risk, and ample share repurchases against the backdrop of our ongoing bullish stance on the subsector and further defensive pivot in our early November.”

The analyst is less bullish on hardlines and expects a move lower.

“As expected, typical retail stock seasonality held true in December with autoparts and home improvement outperforming while electronics, sporting, goods and apparel broadly saw the worst performance as investors sought out low vol/high quality and sold trend deceleration. Given the large drawdown in some of our key Underweights (WSM, W) and similar stocks (e.g., sporting goods, apparel), the next move in HD, LOW, and TSCO could be to the downside, especially given the recent move in rates and a later spring against DIY normalization,” Horvers added.

By Senad Karaahmetovic |

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JPMorgan, Senad Karaahmetovic