Shares of Ulta Beauty (ULTA) plunged on Friday after the largest U.S. cosmetics retailer missed earnings estimates for its fiscal fourth quarter and issued dovish guidance for the full year. The post-earnings decline pushed ULTA’s Relative Strength Index (14-day) below 20, indicating extremely oversold conditions that often precede a relief rally.
Following recent declines, Ulta Beauty stock is down more than 20% from its year-to-date high.
Much of the weakness in ULTA’s results in the fourth quarter was due to a 23% increase in selling, general and administrative expenses as the company continued to modernize its supply chain. Ulta Beauty is focusing capital on automated distribution to reduce labor costs in the long term.
Additionally, management is aggressively investing in virtual try-on technology and TikTok store integrations as part of its broader Ulta Beauty Unleashed strategy.
Over time, these initiatives are expected to improve efficiency and drive margin expansion, making ULTA stock worth owning in today’s post-earnings dip.
Ulta Beauty stock is also attractive at the current, moderate valuation because the company’s massive brands (NYX, L’Oreal, elf) position it well to weather economic weakness in 2026.
Additionally, Ulta Beauty Rewards currently has around 45 million active members generating approximately 95% of total sales, a loyalty moat that most rivals simply cannot replicate.
It’s also worth mentioning that ULTA is authorized to buy back around $1.8 billion in shares this year, making it even more interesting as a long-term investment.
Despite the recent declines, options traders also remain bullish on Ulta Beauty. Contracts expiring in mid-June have the top price set at approximately $644, indicating nearly 20% upside potential from now on.
Wall Street analysts seem to share options traders’ optimism about ULTA stock, especially since it has a track record of closing March and April with notable gains.
According to Barchart, Ulta Beauty Inc’s consensus rating remains at “Moderate Buy,” with an average target of around $712, indicating upside potential of around 30% from now on.