The brokerage firm downgraded the beauty retailer to "neutral" from "buy"
The shares of Ulta Beauty Inc (NASDAQ:ULTA) are down 1.2% at $318.76 at last check, after a downgrade from Guggenheim to "neutral" from "buy." The analyst in question noted the company's profit margins are uncertain, as competition on digital platforms ramps up. The downgrade is a break from the slew of bull notes the beauty retailer received after reporting better-than-expected fourth-quarter earnings and revenue last week.
Ulta Beauty stock is taking a step back from a March 11, two-year high of $351, which it hit one day before its corporate report. Despite today's breather, the shares have support in place at their 40-day moving average, a trendline that's only been breached once on a closing basis since November. Year-over-year, though, ULTA still sports a 97.2% lead.
The brokerage bunch was fiercely optimistic towards the equity coming into today, with 13 of the 19 in coverage carrying a "strong buy" rating, while the remaining six called it a tepid "hold." Plus, the 12-month consensus target price of $335.57 is a 4.9% premium to current levels.
The options pits reflect that optimism, with calls popular. This is per the security's Schaeffer's put/call open interest ratio (SOIR), which sits in the 12th percentile of its annual range, meaning short-term option traders have rarely been more call-biased.
Now seems like a good opportunity to weigh in on ULTA's next move with options. The equity's Schaeffer's Volatility Index (SVI) of 38% stands higher than only 4% of all other readings from the past year. This indicates options players are currently pricing in lower-than-usual volatility expectations.