Ulta Earnings Preview: Huge Expectations Ahead
By:Mike Butler
Ulta Beauty (ULTA) is the largest catch-all beauty retailer in the United States, reports earnings March 14 after the market closes.
Ulta's offerings include skincare and other beauty products and salon services. With more than 1,350 retail spaces in 50 states, and a strong e-commerce presence with tutorials and social content, it's no surprise that the company has taken over the beauty industry.
ULTA stock reached a new all-time high today of $563.23, which is a staggering rally from the October 2023 low of $368.02.
Dave Kimbell, Ulta CEO, offered some strong words to wrap up 2023 in the last earnings release:
"The third quarter represented another strong performance by the Ulta Beauty team, as sales, gross profit, and diluted EPS all exceeded our internal expectations. Our traffic trends remained healthy, our brand awareness increased, and we expanded our loyalty program to a record 42.2 million members."
Ulta has a relatively high expected stock price move this week ahead of the earnings announcement. Based on current implied volatility, the options market is pricing in a +-$47.33 move this week. With a stock price just over $560, this translates to an 8% stock price move in just a few days.
Looking further through the year, we can see that the April 2024 options cycle boasts a +-$52.01 expected move, and the December 2024 options cycle has a +-$124.89 expected move. The weekly expected move makes up a huge chunk of the expected move for April, which tells us that we should expect a lot of volatility after the stock market closes on Wednesday.
There are over 330 million people in the United States, and Ulta Beauty has a loyalty program that exceeds 42 million people. This is a massive chunk of the U.S. population. That membership number tells me anyone who remotely cares about skincare or beauty products has likely come across Ulta's website or retail store.
Bullish investors likely believe Ulta can beat the heightened earnings per share (EPS) and revenue expectations this earnings call and offer a strong outlook for the rest of the year. Ulta has exceeded EPS and revenue expectations three quarters in a row.
Pressure makes diamonds, but it can also blow up a stock price.
With such heightened expectations for the earnings call this week, it seems as though Ulta will need to beat EPS and revenue estimates to maintain the all-time high stock price that was realized today. Ulta bears may believe that the popular beauty store will fall short of expectations, which could send the stock price lower.
Tune in to Options Trading Concepts Live on Wednesday, March 14 at 11 a.m. CDT for a look at options strategies ahead of the Ulta announcement, as well as the Adobe (ADBE) announcement around the same time.
Mike Butler, tastylive director of market intelligence, has been in the markets and trading for a decade. He appears on Options Trading Concepts Live, airing Monday-Friday. @tradermikeyb
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