Is ULTA a good stock to buy? We came across a bullish thesis on Ulta Beauty, Inc. on r/ValueInvesting by raytoei. In this article, we will summarize the bulls’ thesis on ULTA. Ulta Beauty, Inc.’s share was trading at $456.13 as of June 18th. ULTA’s trailing and forward P/E were 17.10 and 16.26 respectively according to Yahoo Finance.
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Ulta Beauty operates as a leading US specialty beauty retailer positioned between mass and prestige cosmetics, competing with Walmart, Amazon, and Sephora while leveraging an omnichannel store base. The company historically delivered strong consistency in earnings growth pre-Covid, with significant expansion in margins and returns driven by its differentiated store experience and loyalty ecosystem.
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Post-Covid, intensifying competition from Sephora, including store-in-store expansion through Kohl’s, pressured same-store sales and led to market skepticism despite continued underlying demand for beauty products. Despite this, Ulta remains structurally profitable, supported by 40% plus gross margins, mid-teens operating margins, and return on invested capital exceeding 20%, well above its cost of capital. Morningstar highlights its 46 million member loyalty program as a key moat, while sustained profitability metrics indicate durable competitive advantages in a fragmented and highly competitive industry.
Recent leadership changes under a new CEO have shifted strategy toward international expansion in Mexico, acquisition of Space NK, and increased digital engagement through TikTok Shop initiatives. However, investor sentiment remains cautious as concerns persist around inventory growth exceeding sales, margin sustainability, and competitive pressures from digitally native and social media driven brands.
Even so, same-store sales growth driven by traffic and higher ticket sizes, alongside continued market share gains from department stores, suggest underlying operational resilience. Valuation models imply fair value between $510 and $616 per share, above current levels, with upside potentially supported by sustained share gains or successful international execution. Entry near Berkshire purchase level around $385 offers margin of safety for investors.
Previously, we covered a bullish thesis on Ulta Beauty (ULTA) by @wallstengine on X (Twitter) in May 2025, which highlighted comp acceleration, easing Sephora competition, and valuation upside from margin expansion. ULTA’s stock price has appreciated by approximately 12.06% since our coverage. raytoei shares a similar view but emphasizes structural moat, loyalty-driven resilience, ROIC strength, leadership strategy shifts, and valuation upside between $510 and $616 per share.
Ulta Beauty, Inc. is not on our list of the 40 Most Popular Stocks Among Hedge Funds. As per our database, 56 hedge fund portfolios held ULTA at the end of the first quarter which was 58 in the previous quarter. While we acknowledge the risk and potential of ULTA as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than ULTA and that has 10,000% upside potential, check out our report about this cheapest AI stock.
Disclosure: None.
