Ulta Beauty Earnings Review & Upside Potential! ULTA stock

Ulta beauty reported earnings and a lot of you are asking me about my opinion if I believe the company is a disaster the stock is a disaster and if earnings were just really really bad if something has changed if it's still undervalued what I thinking about it in general so that's what I'm going to discuss in a very short video my opinion and just let you know what I say and the stock is down around 7 and a half% in the after hours and after hours sometimes isn't the most accurate thing ever I mean it could go up and down could be green tomorrow or it could be maybe down 20% we don't really know but it's more about the open but a lot of investors right now are interested in Ulta beauty mainly because burer has way disclosed a stake in the company and a lot of people love to copy War Buffet or whatever Brooker has away buys and know they have pretty good track record and they opened a position in the company small position but this is what got a lot of people interested in the stock and for this earnings report it wasn't good at all net sales increased around 1% that wasn't too bad mainly from new store openings they opened a lot of new stores so that was very good in terms of comp sales which what really matters amongst retailers they decreased 1.2% versus an increase of 8% that was a massive massive difference and I just have to say over the last two to three years a lot of retailers had very good years 2024 has been a terrible year for retailers especially in terms of comp sales if you're comparing this year on a a very high year which was in 2023 2024 is looking terrible and this is part of my thesis that I highlighted in my Sunday video that we are already in a recession we've been in a recession since January of 2024 and we're likely halfway through this recession and we can see it from a lot of the retail stocks we don't need the yield curve to turn positive or for the government to tell us that this was a recession we can clearly see it amongst consumer discretionary among especially retail stocks and this is what's been showing up ala Beauty declined 1 2% they also revised down guidance from 2 to 3% in comp sales grow to 0% to a decline of 2% which was a very terrible one very bad operating margin they also Revis it down around 1% you know in terms of earnings per share that was the best one of so far you know 25 20 26 they barely revised it down to 2260 2350 and this is because the company buys back law of stock it's hard for it to struggle in terms of an earning for share Metro but still it wasn't a good report at all you know one thing that upset me was the company's share repurchase Outlook still the same it says no change and with them knowing that such revision and guidance is going to cause you know some Panic is going to cause the stock to go down they should have increased share purchase guidance you know for the for investors to have something to look forward to you know I think that would have been a good move from a company and it was a mistake they haven't done it so all that stuff looks pretty terrible but the last you know quarter was also kind of terrible because they've been revising guidance for a few quarters right now and the company is facing competition from Amazon you have Sephora you have all these places so it has now no kind of a moe it doesn't have like a huge Moe it doesn't have a massive competitive Advantage people can buy the sub from many different places and it doesn't have you know this kind of a quality company that's buy and hold forever like apple and Microsoft so why did Warren Buffet buy it why did I buy it why did a lot of value investors buy the stock and this is because when you're looking for a value investment when you're looking for a turnaround it's very different mentality than looking at a quality company to hold forever and this is a lot of the misconception that people have is that you can only make a money if the company is good company if it's a quality company that mean you're going to make money if it's a terrible company that mean there's no way it's going to end up being a good investment but the best explanation of this came from horard marks which he said it's not what you buy it's what you pay meaning if you buy the best company ever even msci has been flat for like four or 5 years even though it was a quality company but it's about what you pay not just what you're really buying and the same for Master Card he said and success in investing doesn't come from buying good things but from buying things well and if you don't know the difference you're in the wrong business if I'm trying to apply this for Ulta beauty and we looked at all those negatives Ulta beauty right now if we use a 2260 it's trading at 15 times earnings 15 times earnings is not expensive at all on a historical basis Zine was 27 times it traded as high as 42 times now it's trading at 15 times on the lower end of the range and if you look at last year which where the stock was trading at and this is where I first bought it it was around 15 times earnings and after the company showed some signs of growth that everything is stabilizing and expectations were starting to look better the multiple went from 15 times earnings up to 21 times earnings within four or 5 months and it came back down as low as 12 times and now it's sitting at 15 times earnings so 15 times earnings for Ulta pury for a company that has pretty much no debt they have 413 million of cash and cash equivalent and pretty much no debt other than some lease liabilities which is really like you know long-term debt and they do have a good buyback program 549,000 shares they buy back 5 to six % of the company every single year and they have no debt and they have some kind of a good business model because even though we're in some kind of recession a lot of retailers have been struggling a lot but people and women they're still buying makeup they're still going there they're still doing a lot of things you know even those things have slowed down but it's still very solid in my opinion so you're getting somewhat of a solid business with no debt and good margins good management at 15 times earnings is not expensive at all if you look at the analyst estimates they expect this year to be the worst year for Ulta and to get better next year and to almost have a double in earnings per share from 22 to $41 by 2029 which is fiscal year which is 2028 so 5 years from now even though they were 50% wrong and earnings per share went up 35 or 40% with 15 times earnings and no thatb for this company I don't think this is expensive at all especially if you consider the comp sales effect meaning this year has been really bad next year is going to be much easier to beat it's going to look much better on a comp sales basis and if you take all these things into consideration in my opinion Ulta beauty is not expensive here at all at 15 times earnings I am worried of them keep revising earnings estimates or estimates in general and if they keep doing it for another one to two quarters then I would start to worry but I believe this has to be it because it looks pretty conservative to me from a 3% increase to a decrease of 2% so I think this is pretty conservative with their expansion into Mexico things have to start looking better very very soon so nothing has really changed in my opinion I wish it was a little bit better but it wasn't the stock is down 7% we don't know what's going to open at tomorrow but around 339 to 341 the stock is trading at 15 times earnings using their lower end of their earnings per share estimate or guidance and I still believe the stock is solid as it turn around not as a long investment but as they turn around the stimate changes things get better that's what I would do and I sell it and move on that's what I do with these stocks I like to have you know quality or gross companies for the long term and Ulta is not a gross company it's mainly a company that's inexpensive relative to its fundamentals which aren't the best but relative to the price that makes the stock a good opportunity and this is my opinion on Ulta Bey stock I hope you enjoyed it not FAL advice as always if you did please press the like button and maybe consider subscribing so I'll talk to you in another video